Question:

You own 2,500 shares of stock in XYZ Corporation. You will receive a $2 per share dividend in one year. In two years, XYZ Corporation will pay a liquidating dividend of $40 per share. The required return on XYZ Corporation stock is 90 percent.

a) What is the current share price of your stock?

Current Stock Price = $

b) Suppose you only want $100 total in dividends the first year. What will your homemade dividend be in two years? (You can own a portion of a share, for example 12.34 shares)

Homemade Dividend = $