Caroline owns 3000 shares of stock in Mousey Corporation. She will receive $3.30 per share dividend in one year. In two years, Mousey will pay a liquidating dividend of $45 per share. The required return on Mousey stock is 12%. Answer these questions: a) What is the current share price of Mousey stock? b) If Caroline would rather have equal dividends in each of the next two years, show how she can accomplish this by creating home dividends! c) If Caroline want only $800 total in dividends the first year. What will her homemade dividend be in two years? d) Explain what is homemade dividend? Does the timing of dividend matters or not? Why!

Caroline owns 3000 shares of stock in Mousey Corporation. She will receive $3.30 per share dividend in one year. In two years, Mousey will pay a liquidating dividend of $45 per share. The required return on Mousey stock is 12%. Answer these questions: a) What is the current share price of Mousey stock? b) If Caroline would rather have equal dividends in each of the next two years, show how she can accomplish this by creating home dividends! c) If Caroline want only $800 total in dividends the first year. What will her homemade dividend be in two years? d) Explain what is homemade dividend? Does the timing of dividend matters or not? Why!

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 2P

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