What is the current stock price

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You own 250 shares of ABC's stock. ABC will pay $40 per share dividend in year 1, $160 per share dividend in year 2, and $120 liquidating dividend per share in year 3. The required return on ABC's stock is 12%.

a) What is the current stock price?

b) If you want equal dividends in each of the three years and accomplish this by creating homemade dividends, how many shares you have to sell/buy at the end of year 1? At the end of year 2?

c) If you want $1,500 and $3,600 in dividends for year 1 and year 2 respectively, how many shares you have to sell/buy at the end of year 1? At the end of year 2? What will your homemade dividend be in year 3?

Please provide solution by hand written not using excel if possible

Reference no: EM133004074

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