You own 1,100 shares of stock in Avondale Corporation. You will receive a dividend of $2.60...

You own 1,100 shares of stock in Avondale Corporation. You will receive a dividend of $2.60 per share in one year. In two years, the company will pay a liquidating dividend of $48 per share. The required return on the company's stock is 20 percent.

a.	Ignoring taxes, what is the current share price of your stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b.	If you would rather have equal dividends in each of the next two years, how many shares would you sell in one year? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
c.	What would your cash flow be for each year for the next two years if you create equal homemade dividends? Hint: Dividends will be in the form of an annuity. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Expert Solution

jeff jeffy answered 1 year ago

You own 1,100 shares of stock in Avondale Corporation. You will receive a dividend of $1.50...

You own 1,100 shares of stock in Avondale Corporation. You will receive a dividend of $1.50 per share in one year. In two years, the company will pay a liquidating dividend of $45 per share. The required return on the company's stock is 20 percent. a. Ignoring taxes, what is the current share price of your stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If you would rather have equal...

You own 1,100 shares of stock in Avondale Corporation. You will receive a $2.00 per share...

You own 1,100 shares of stock in Avondale Corporation. You will receive a $2.00 per share dividend in one year. In two years, the company will pay a liquidating dividend of $75 per share. The required return on the company's stock is 20 percent. a. Ignoring taxes, what is the current share price of your stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)(Show work) b. If you would rather have equal...

You own 1,100 shares of stock in Avondale Corporation. You will receive a $1.80 per share...

You own 1,100 shares of stock in Avondale Corporation. You will receive a $1.80 per share dividend in one year. In two years, the company will pay a liquidating dividend of $45 per share. The required return on the company's stock is 20 percent. a. Ignoring taxes, what is the current share price of your stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If you would rather have equal dividends...

You own 1,100 shares of stock in Avondale Corporation. You will receive a $2.00 per share...

You own 1,100 shares of stock in Avondale Corporation. You will receive a $2.00 per share dividend in one year. In two years, the company will pay a liquidating dividend of $48 per share. The required return on the company's stock is 20 percent. a. Ignoring taxes, what is the current share price of your stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If you would rather have equal dividends in...

You own 1,000 shares of stock in Avondale Corporation. You will receive a dividend of $2.90...

You own 1,000 shares of stock in Avondale Corporation. You will receive a dividend of $2.90 per share in one year. In two years, the company will pay a liquidating dividend of $59 per share. The required return on the company's stock is 14 percent. a. Ignoring taxes, what is the current share price of your stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If you would rather have equal dividends...

You own 1,650 shares of stock in Avondale Corporation. You will receive a dividend of $1.50...

You own 1,650 shares of stock in Avondale Corporation. You will receive a dividend of $1.50 per share in one year. In two years, the company will pay a liquidating dividend of $54 per share. The required return on the company's stock is 20 percent. a. Ignoring taxes, what is the current share price of your stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If you would rather have equal...

you own 1000 shares of stock in avondale corporation. you will receive a $3.15 per sahre...

you own 1000 shares of stock in avondale corporation. you will receive a $3.15 per sahre dividend in one year. in two years, the company will pay a liquidating dividend of $57 per share. the required return on the company's stock is 15 percent. ignoring taxes, what is the current share price of your stock? if you would rather have equal dividends in each of the next two years, how many shares would you sell in one year? what would...

You own 1,000 shares of stock in Avondale Corporation. You will receive $3.115 per share cash...

You own 1,000 shares of stock in Avondale Corporation. You will receive $3.115 per share cash dividend in one year. In two years, the company will pay a liquidating dividend of $57 per share. The required return on the company’s stock is 15 percent. What is the current price of your stock? (Ignore 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 (Hint: dividends...

A corporation buys shares of another domestic corporation. They receive $100,000 of dividend income. They hold...

A corporation buys shares of another domestic corporation. They receive $100,000 of dividend income. They hold the shares for 75 days and then sell the stock. What tax consequences accrue to the corporation from the receipt of the dividend? What is the rationale for the rule? Would the result change if the corporation only held the stock for 5 days? If so, why? Does it really violate the rationale for the general rule?

Raptor Corporation declares a dividend permitting its common shareholders to elect to receive 9 shares of...

Raptor Corporation declares a dividend permitting its common shareholders to elect to receive 9 shares of cumulative preferred stock or 3 additional shares of Raptor common stock for every 10 shares of common stock held. Raptor has only common stock outstanding (fair market value of $45 per share). One shareholder elects to receive preferred stock, while the remaining shareholders choose the common stock. Raptor wants to know whether the shareholders recognize any gross income on the receipt of the stock....

Question

You own 1,100 shares of stock in Avondale Corporation. You will receive a dividend of $2.60...

Solutions

Expert Solution

Related Solutions

You own 1,100 shares of stock in Avondale Corporation. You will receive a dividend of $1.50...

You own 1,100 shares of stock in Avondale Corporation. You will receive a $2.00 per share...

You own 1,100 shares of stock in Avondale Corporation. You will receive a $1.80 per share...

You own 1,100 shares of stock in Avondale Corporation. You will receive a $2.00 per share...

You own 1,000 shares of stock in Avondale Corporation. You will receive a dividend of $2.90...

You own 1,650 shares of stock in Avondale Corporation. You will receive a dividend of $1.50...

you own 1000 shares of stock in avondale corporation. you will receive a $3.15 per sahre...

You own 1,000 shares of stock in Avondale Corporation. You will receive $3.115 per share cash...

A corporation buys shares of another domestic corporation. They receive $100,000 of dividend income. They hold...

Raptor Corporation declares a dividend permitting its common shareholders to elect to receive 9 shares of...