Question

A firm will pay a $2 dividend per share in one year and a liquidating dividend of $50 per share in two years. The required return on the firm is 15%. An investor owns 1 share of the firm. The investor wants to receive equal cash flows in each of the next two years. Find the price of the firm's stock now and in one year, the dividend the investor wants in one year, and the number of shares the investor should buy or sell in one year.

Answer 1

Price of Stock Now =Dividend Year 1/(1+rate) +Liquidating dividend year 2/(1+Rate)^2 =2/1.15+50/1.15^2 =39.5463 or 39.55
Price of Stock in 1 year =Liquidating dividend year 2/(1+Rate) =50/1.15 =43.48

For Equal Dividends
Price of Stock =Dividend/(1+r)+Dividend/(1+r)^2
39.5463=Dividend*(1/1.15+1/1.15^2)
Dividend =39.5463/1.62571 =24.33

For the last part please provide information on the total value to be received