You own 1000 shares of stock in Avondale Corp. You will receive dividend of $1 per share in one year. In two years, Avondale will pay a liquidating dividend of $56 per share. The required rate of return on Avondale stock is 14%. Ignore taxes.

(iii) If you would rather receive dividend of $4 per share in 1 year, (a) show you can accomplish this by creating homemade dividends. (3 pt) (b) As a result, what is your total income in year 1 and year 2 respectively? (3 pt) (c) What is the present value of your cash flows (income) in years 1 and 2? (2 pt) Divide it by 1000 (number of shares you own). Is it same as (or very close to) Avondale's current stock price?

(iv) If you prefer to receive an income of $400 only in year 1 and you plan to reinvest excess cash in the stock (by buying more shares) after you receive the $1 dividend per share from the company, (a) what is your total income in year 2? (3 pt) (b) What is the present value of your cash flows (income) in years 1 and 2? Divide it by 1000 (number of shares you own). Is it same as (or very close to) Avondale's current stock price?

(v) If you would prefer to receive equal dividends in each of the next two years, show you can accomplish this by creating homemade dividends.