1. You own 1,100 shares of stock in Avondale Corporation. You will receive a $2.40 per share dividend in one year. In tw

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1.
You own 1,100 shares of stock in Avondale Corporation. You willreceive a $2.40 per share dividend in one year. In two years, thecompany will pay a liquidating dividend of $72 per share. Therequired return on the company's stock is 20 percent. Suppose youwant only $600 total in dividends the first year. What willyour homemade dividend be in two years? (Do not roundintermediate calculations and round your answer to the nearestwhole number, e.g., 32.)
2.
National Business Machine Company (NBM) has $5.8 million ofextra cash after taxes have been paid. NBM has two choices to makeuse of this cash. One alternative is to invest the cash infinancial assets. The resulting investment income will be paid outas a special dividend at the end of three years. In this case, thefirm can invest in Treasury bills yielding 3.6 percent or a 6percent preferred stock. Assume IRS regulations allow thecompany to exclude from taxable income 50 percent of the dividendsreceived from investing in another company’s stock. Anotheralternative is to pay out the cash now as dividends. This wouldallow the shareholders to invest on their own in Treasury billswith the same yield, or in preferred stock. The corporate tax rateis 23 percent. Assume the investor has a 31 percent personal incometax rate, which is applied to interest income and preferred stockdividends. The personal dividend tax rate is 20 percent on commonstock dividends.
Suppose the company reinvests the $5.8 million and pays adividend in three years.
What is the total aftertax cash flow to shareholders if thecompany invests in T-bills? (Do not round intermediatecalculations and enter you answer in dollars, notmillions, rounded to 2 decimal places, e.g.,1,234,567.89.)
Suppose instead that the company pays a $5.8 million dividendnow and the shareholder reinvests the dividend for three years.
c.
What is the total aftertax cash flow to shareholders if theshareholder invests in T-bills? (Do not roundintermediate calculations and enter you answer in dollars, notmillions, rounded to 2 decimal places, e.g.,1,234,567.89.)