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You own 1,000 shares of stock in Darby Corporation. You will receive a dividend of $2.60 per share in one year. In two years, Darby
You own 1,000 shares of stock in Darby Corporation. You will receive a dividend of $2.60 per share in one year. In two years, Darby will pay a liquidating dividend of $53 per share. The required return on Darby stock is 14 percent. What is the current share price of your stock (ignoring taxes)? If you would rather have equal dividends in each of the next two years, show how you can accomplish this by creating homemade dividends. (Hint: Dividends will be in the form of an annuity.)
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