Question

1) The market value balance sheet for Desktop Manufacturing is shown here. The company has declared a 10 percent stock dividend. The stock goes ex dividend tomorrow (the chronology for a stock dividend is similar to that for a cash dividend).
  

Market Value Balance Sheet
Cash	$	91,000			Debt	$	150,000
Fixed assets		750,000			Equity		691,000
Total	$	841,000			Total	$	841,000

  
There are 26,000 shares of stock outstanding. What is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
Current share price           $  

What will the ex-dividend price be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
Ex-dividend price           $  

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2)You own 1,100 shares of stock in Avondale Corporation. You will receive a $2.60 per share dividend in one year. In two years, the company will pay a liquidating dividend of $75 per share. The required return on the stock is 20 percent.
  
Ignoring taxes, what is the current share price of the stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
Share price           $  
  
If you would rather have equal dividends in each of the next two years, how many shares would you sell in one year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
Number of shares           $  

What would your cash flow be each year for the next two years? Hint: Dividends will be in the form of an annuity. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Cash flow           $

Answer 1