Q2. (a) The financial manager of Diamond Group Inc expects that the firm will receive a cash flow of $10,000 immediately and another $10,000 next year. In the firm's current dividend policy, firm will pay dividend to shareholders equal to the available cash flow in each period. The first dividend will be paid immediately and the second dividend will be paid next year. The required rate of return is 10% and there are 1,000 shares outstanding. (i) (ii) Calculate the value of each share. (2 marks) In alternative dividend policy, firm pays first total dividend of $11,000 immediately, firm has to issue new stocks now since the available cash flow is only $10,000. Given the required rate return of 10%, demonstrate and explain how current and alternative dividend policies are indifferent to shareholders with calculation. (6 marks) Diamand Group can choose pay higher dividend per share at $11 and lower dividend per share at $9 at Date 0. Illustrate the implication of the diagram below to the firm's financial manager and stockholders. (12 marks) (iii) Q2. (a) The financial manager of Diamond Group Inc expects that the firm will receive a cash flow of $10,000 immediately and another $10,000 next year. In the firm's current dividend policy, firm will pay dividend to shareholders equal to the available cash flow in each period. The first dividend will be paid immediately and the second dividend will be paid next year. The required rate of return is 10% and there are 1,000 shares outstanding. (i) (ii) Calculate the value of each share. (2 marks) In alternative dividend policy, firm pays first total dividend of $11,000 immediately, firm has to issue new stocks now since the available cash flow is only $10,000. Given the required rate return of 10%, demonstrate and explain how current and alternative dividend policies are indifferent to shareholders with calculation. (6 marks) Diamand Group can choose pay higher dividend per share at $11 and lower dividend per share at $9 at Date 0. Illustrate the implication of the diagram below to the firm's financial manager and stockholders. (12 marks) (iii)