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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
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Phoniex University
Oct-2001 - Nov-2016
10.       Homemade Dividends   You own 1,000 shares of stock in Avondale Corporation. You will receive a $1.85 per share dividend in one year. In two years,
Avondale will pay a liquidating dividend of $58 per share. The required return on Avondale stock is 15 percent. What is the current share price of your stock
(ignoring taxes)? If you would rather have equal dividends in each of the next two
Â
years, show how you can accomplish this by creating homemade dividends. Hint:
Dividends will be in the form of an annuity.
Â
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