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Green Devil Corporation stock, of which you own 100 shares, will pay a $3 per share dividend one year from today. Two years from now Green Devil will close its doors and stockholders will receive a liquidating dividend of $12 per share. The required rate of return on Green Devil stock is 20 percent. (a) What is the current price of Green Devil stock? (b) If you prefer to receive $10 per share dividend (total $1,000 cash) one year from today, how can you receive the desired amount of cash flow? Specifically explain your strategy. (I am asking how many shares you would sell in year 1 and how much liquidating dividends you would receive.) (c) If you prefer to receive equal amounts of money in each of the next two years, how can you accomplish this? Explain your strategy.

Financial Management, Finance

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