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please answer Q 2 which refers too Q1. i have listed the Answer but do not understand the Liquidating Discount part of the equation. please
please answer Q 2 which refers too Q1. i have listed the "Answer" but do not understand the Liquidating Discount part of the equation. please show work.
1. Dividend Valuation (LO1, CFA6) JJ Industries will pay a regular dividend of $2.40 per share for each of the next four years. At the end of the four years, the company will also pay out a $40 per share liquidating dividend, and the company will cease operations. If the discount rate is 10 percent, what is the current value of the company's stock? 2. Dividend Valuation (LO1, CFA6) In Problem 1, suppose the current share price is $60. If all other information remains the same, what must the liquidating dividend be? V9: P0=$2.40/(1.10)1+$2.40/(1.10)2+$2.40/(1.10)3+$2.40/(1.10)4+$LD/(1.10)4=$60.00$52.39=LD/(1+.10)4LD=$76.71 Step by Step Solution
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