You own 1,000 shares of stock in Avondale Corporation. You will receive a $3.45 per share dividend in one year. In two years, the company will pay a liquidating dividend of $62 per share. The required return on the company’s stock is 15 percent. Suppose you want only $1,500 total in dividends the first year.   What will your homemade dividend be in two years?

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter8: Basic Stock Valuation
Section: Chapter Questions
Problem 2P
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You own 1,000 shares of stock in Avondale Corporation. You will receive a $3.45 per share dividend in one year. In two years, the company will pay a liquidating dividend of $62 per share. The required return on the company’s stock is 15 percent. Suppose you want only $1,500 total in dividends the first year.

 

What will your homemade dividend be in two years? 

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