03:56 HD HD 23%. Your subscription will expire on Nov. 5. Turn on auto-renew to keep accessing solutions. BBC will pay a dividend of $14 per share at the end of year 1 and a liquidation dividend of $122 per share at the end of year 2. The cost of equity is 11%. If you own 131 shares and want a total dividend of $1,348 at the end of year 1, how many shares do you buy/sell at the end of year 1? (Assume you can buy/sell any fraction of stock. Enter the number of shares to buy as a positive value and number of shares to sell as a negative value) Here's the best solution from Chegg's library Solution 1st step All steps ✓ Answer only Step 1 Introduction We must take into account the initial dividend payment, the cost of equity, and the liquidation dividend in order to calculate how many shares of BBC one should purchase or sell at the conclusion of the first year in order to obtain a total dividend of $1,348. With 131 shares, the investor is expected to receive a final liquidation payout at the end of year 2, and at the end of year 1 they are already receiving dividends. Calculating the current dividends and then solving for the necessary adjustment in share ownership are the first steps in adjusting the number of shares at the end of the first year to satisfy a particular total dividend target. Explanation: To achieve a particular financial goal, this issue combines dividend income and the time value of money. In the first setup, dividends from current shares are received, and shareholding is adjusted to match a target dividend income while taking future payouts into account. Step 2 Step 1: Determine the total dividend for the first year based on 131 shares. Dividend Shortfall = the current total dividend for year 1 + 131 shares = $1,348 - $1,834 = $-486 In this step, the initial dividend income from the present shares is determined, without any modifications. Step 2: Calculate the discrepancy between the current payout and the desired annual dividend amount. Dividend Shortfall = the current dividend the target total dividend for year 1. = $1,348 - $1,834 = $-486 The surplus amount over the intended dividend is calculated in this stage, indicating the necessity for a modification. Step 3: Determine how many shares need to be adjusted in order to reach the desired dividend. We must sell shares because the target total dividend is lower than the present dividend. Any follow-up questions? Instant responses come from subject-matter experts, Al models trained on Chegg's learning content, or OpenA Automated chats are recorded & may be used to improve your experience. Please don't share sensitive info. ||| O .k