You own 5,000 shares of stock in a firm. You will receive $4 per share dividend in one year. In two years, the firm will pay a liquidating dividend of $40 per share. The required return on the companys stock is 14 percent. Ignore taxes, transaction costs, and other imperfections for the problem.

1. a) Find the current share price of the stock.

2. b) Ifyouwouldratherhaveequaldividendoneachofthenexttwoyears,showhowyoucan

   achieve this by creating homemade dividends. What is the amount of cash flow you would

   receive from your strategy in the second year?

3. c) Suppose you want only $5,000 total in dividends the first year. What will your homemade

   dividend be in two years?