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    Liquidating dividends

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    Andahl Corporation stock, of which you own 500 shares, will pay a $2-per-share dividend one year from today. Two years from now Andahl will close its doors; stockholders will receive liquidating dividends of $17.5375 per share. The required rate of return on Andahl stock is 15 percent.
    1. What is the current price of Andahl stock?
    2. You prefer to receive equal amounts of money in each of the next two years. How will you accomplish this?

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    Solution Preview

    Andahl Corporation stock, of which you own 500 shares, will pay a $2-per-share dividend one year from today. Two years from now Andahl will close its doors; stockholders will receive liquidating dividends of $17.5375 per share. The required rate of return on Andahl stock is 15 percent.
    1. What is the current price of Andahl stock?
    2. You prefer to receive equal amounts of money in each of the next two years. How will you accomplish this?

    1. What is the current price of Andahl ...

    Solution Summary

    The stock price of stock is calculated given that the company will receive liquidating dividends at the end of 2 years. Also the method by which a shareholder will receive equal amounts of money in each of the next two years is shown.

    $2.19

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