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You own 1, 100 shares of stock in Avondale Corporation. You will receive a dividend of $1.70 per share in one year. In two years,
You own 1, 100 shares of stock in Avondale Corporation. You will receive a dividend of $1.70 per share in one year. In two years, Avondale will pay a liquidating dividend of $75 per share. The required return on Avondale stock is 20 percent. Ignoring taxes, what is the current share price of your stock? Share price $___________ If you would rather have equal dividends in each of the next two years, how many shares would you sell in one year? Number of shares ___________ What would your cash flow be for each year for the next two years if you create equal homemade dividends? Cash flow $_____________
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