You own 2,000 shares of Equity in Galatsi Property plc. You will receive a 0.25 per share dividend in one year. In 2 years Galatsi will pay a liquidating dividend of 30.75 per share. The required return on Galatsi shares is 18 per cent.

a) What is the current share price of your equity (ignoring taxes)?

b) If you would rather have equal dividends in each of the next 2 years, show how you can accomplish this by creating homemade dividends.

(Hint: Dividends will be in the form of an annuity.