The stock price of XYZ is $100. One million shares of XYZ (a negligible fraction of the

Question:

The stock price of XYZ is $100. One million shares of XYZ (a negligible fraction of the shares outstanding) are buried on a tiny, otherwise worthless plot of land in a vault that would cost $50 million to excavate. If XYZ pays a you will have to dig up the shares to collect the If you believe that XYZ will never pay a what would you pay for the land?
b. If you believe that XYZ will pay a liquidating in 10 years, and the continuously compounded risk-free rate is 5%, what would you pay for the land?
c. Suppose that XYZ has a 1% yield and a volatility of 0.3. At what price would you excavate and what would you pay for the land?
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...