Problem 6-2 JJ Industries will pay a regular dividend of $0.85 per share for each of...

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Question

Problem 6-2 JJ Industries will pay a regular dividend of $0.85 per share for each of the next four years. At the end of four

Answer 1

Answer #1

Liquidating dividend = Current share price - Present value of 4 year dividend

Computation of present value of dividend
year	dividend	PVIF @ 9%	present value
1	0.85	0.9174	0.7798
2	0.85	0.8417	0.7154
3	0.85	0.7722	0.6564
4	0.85	0.7084	0.6022
			2.7538

therefore liquidating dividend = 79-2.7538			76.2462

Liquidating dividend at the end of year 4 = 76.25*(1+9%)^4			107.63

		Therefore answer =	107.63

Answer 2

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