Sunset Corp. is an all-equity firm that will pay a dividend of $8.75/share next year and...
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Sunset Corp. is an all-equity firm that will pay a dividend of $8.75/share next year and a liquidating dividend of $12 at the end of the 2nd year. The current stock price is $17.87 per share. Ignore taxes and assume a discount rate of 10%. You own 2,500 shares in Sunset. If you were to use homemade dividends to generate equal dividends over the next two years, how many shares would you need to buy or sell at the end of the first year? Assume fractional shares can be bought and sold. Tip: use two decimal places on per-share dividends and whole numbers (no decimals) for total dividends. A) You would need to sell 216.84 shares at the end of the first year. B) You would need to sell 322.92 shares at the end of the first year. C) You would need to sell 355.18 shares at the end of the first year. D) You would need to buy 442.86 shares at the end of the first year. E) You would need to buy 355.18 shares at the end of the first year. Sunset Corp. is an all-equity firm that will pay a dividend of $8.75/share next year and a liquidating dividend of $12 at the end of the 2nd year. The current stock price is $17.87 per share. Ignore taxes and assume a discount rate of 10%. You own 2,500 shares in Sunset. If you were to use homemade dividends to generate equal dividends over the next two years, how many shares would you need to buy or sell at the end of the first year? Assume fractional shares can be bought and sold. Tip: use two decimal places on per-share dividends and whole numbers (no decimals) for total dividends. A) You would need to sell 216.84 shares at the end of the first year. B) You would need to sell 322.92 shares at the end of the first year. C) You would need to sell 355.18 shares at the end of the first year. D) You would need to buy 442.86 shares at the end of the first year. E) You would need to buy 355.18 shares at the end of the first year.
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To determine the number of shares you would need to buy or sell at the end of the first year to gene... View the full answer
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0133400694
1st canadian edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford, David A. Stangeland, Andras Marosi
Posted Date:
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