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You have 2 , 5 0 0 shares in Lovely Chinese Herbs Company. Lovely Chinese Herbs willpay $ 2 . 5 dividend per share in

You have 2,500 shares in Lovely Chinese Herbs Company. Lovely Chinese Herbs willpay $2.5 dividend per share in Year One and a liquidating dividend of $93 per share in Year Two. Suppose the required rate of return on Lovely Chinese Herbs is 12% and there is no dividend tax. i) Calculate the current share price of Lovely Chinese Herbs. ii) If you want to have equal dividend in each of next two years. Explain how you canachieve this using homemade dividend method. How many shares will you need to buy or sell in Year One accordingly? Show your workings.

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