Question

HELP!


Please answer i)

Answer 1

(i) The increase expected in the share price between the first year and the third year is $0.90

(ii) The 10th year

Explanation:

(i) The given relation is
`V = 2.95+2\cdot log_(10)\left (10\cdot t + 1 \right )`

In the first year, we have t = 1, which gives;

`V = 2.95+2\cdot log_(10)\left (10* 1 + 1 \right ) = 2.95+2\cdot log_(10)\left (1 1 \right ) = \$5.03`

In the third year, we have t= 3 which gives;

`V = 2.95+2\cdot log_(10)\left (10* 3 + 1 \right ) = 2.95+2\cdot log_(10)\left (31 \right ) = \$5.93`

Therefore, the increase expected in the share price between the first year and the third year is $5.93 - $5.03 = $0.90

(ii) When the share price value becomes >$7.00, we have;

`7 = 2.95+2\cdot log_(10)\left (10\cdot t + 1 \right )`

Which gives;

7 - 2.95 = 2·㏒(10·t + 1)

4.05/2 = ㏒(10·t + 1)

2.025 = ㏒(10·t + 1)

`10^(2.025) = 10 \cdot t + 1`

105.93 = 10·t + 1

104.93 = 10·t

t = 104.93/10 = 10.493 ≈ 10.5 years which is within the 10th year.