You own 100 shares of stock. It will pay (per share) $10 dividend in year 1, $25
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Question:
$175 liquidating dividend in year 10. The required return on the stock is 10%.
a) What is the current stock price?
b) You want the same amount of dividend in each of the 10 years and accomplish this by creating
homemade dividends. Assume that you can buy/sell fractional shares.
i. How many shares do you sell/buy at the end of year 1?
ii. How many shares do you sell/buy at the end of year 2?
iii. How many shares do you own at the beginning of year 10?
Related Book For
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
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