You own 20 shares of Shane's Aircraft. You are told that you will receive a dividend of $0.50 per share in year 1 and a liquidating dividend of $13.80 per share in the following year. The required return is 20% and you can assume no taxes.
1) What is the price per share of the common stack of Shane's Aircraft?
a) $10.00
b) $12.00
c) $13.80
d) $13.30
2) Suppse that you would rather have equal dividends in each of the two years, what is the dividend amount that you will receive?
a) $8.50
b) $7.15
c) $6.55
d) $6.25