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You own 1,000 shares of stock in Avondale Corporat...

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Question

You own 1,000 shares of stock in Avondale Corporation. You will receive $2.30 per share dividend in one year. In two years, Avondale will pay a liquidating dividend of $53 per share. The required return on Avondale stock is 15%. What is the current share price of your stock (ignoring taxes)? If you would rather have equal dividends in each of the next two years, show how you can accomplish this be creating homemade dividends. Hints: dividends will be in the form of an annuity.

 

Paper#10092 | Written in 18-Jul-2015

Price : $25
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