2. (12 marks) UW Inc. has 100.000 shares outstanding. The firm will be liquidated after 2 years. Earnings will be $500.000 at the end of year 1. In addition, an investment outlay of $200.000 at the end of year 1 has already been decided upon to generate earnings of $800.000 at the end of year 2. UW is all-equity financed with a required rate of return of 16%. Assume that the firm operates in a world with perfect capital markets. The firm's policy is to pay out any surplus cash as dividends. (a) (2 marks) What is the current share price of UW's stock? (b) (5 marks) John owns 10% of UW Inc. and wants an income from the firm of $15,000 at the end of year 1. Show how she can achieve this (without a change in the firm's dividend policy). What percentage of the firm will she own after the end of year 1 if she follows this strategy? (c) (5 marks) How can John obtain the same income as in part (b) through changing the current dividend policy of the firm? Assume there is no other investment opportunity other than issuing or repurchasing shares. How many shares will UW Inc. have outstanding at the end of year 1 under the new policy? What percentage of the firm will John own at that time? 2. (12 marks) UW Inc. has 100.000 shares outstanding. The firm will be liquidated after 2 years. Earnings will be $500.000 at the end of year 1. In addition, an investment outlay of $200.000 at the end of year 1 has already been decided upon to generate earnings of $800.000 at the end of year 2. UW is all-equity financed with a required rate of return of 16%. Assume that the firm operates in a world with perfect capital markets. The firm's policy is to pay out any surplus cash as dividends. (a) (2 marks) What is the current share price of UW's stock? (b) (5 marks) John owns 10% of UW Inc. and wants an income from the firm of $15,000 at the end of year 1. Show how she can achieve this (without a change in the firm's dividend policy). What percentage of the firm will she own after the end of year 1 if she follows this strategy? (c) (5 marks) How can John obtain the same income as in part (b) through changing the current dividend policy of the firm? Assume there is no other investment opportunity other than issuing or repurchasing shares. How many shares will UW Inc. have outstanding at the end of year 1 under the new policy? What percentage of the firm will John own at that time