You own 1,000 shares of stock in Dropped Call Communications. You will receive a $3.50 per share

Question:

You own 1,000 shares of stock in Dropped Call Communications. You will receive a $3.50 per share dividend in one year. In two years, Dropped Call will pay a liquidating dividend of $45 per share. The required return on Dropped Call stock is 15 percent. 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 by creating homemade dividends.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...