Azaria own 1,000 shares of Chuck's Inc. Hefty follows a constant dividend policy, implying that it will pay the same dividend per share each year indefinitely. The dividend per share is $2.30 per year. You intend to invest in Hefty’s stock and hold it for 2 years. At the same time, you would like to receive at least $17 per share as dividend in the second year. You wish to achieve your goal by following the homemade dividends strategy in a world without taxes. Will you be able to do so? Substantiate your answer through relevant computations. Investors require a return of 15% on Hefty’s stock
Azaria own 1,000 shares of Chuck's Inc. Hefty follows a constant dividend policy, implying that it will pay the same dividend per share each year indefinitely. The dividend per share is $2.30 per year. You intend to invest in Hefty’s stock and hold it for 2 years. At the same time, you would like to receive at least $17 per share as dividend in the second year. You wish to achieve your goal by following the homemade dividends strategy in a world without taxes. Will you be able to do so? Substantiate your answer through relevant computations. Investors require a return of 15% on Hefty’s stock.
Dividend per share = $2.30
Number of shares = 1,000
Dividend actually received per year in second year = $17 = Target dividend
Required return = 15%
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