Sooner-than Later (STL) Inc. announces that it will pay a $75 per dividend next year, followed by a final dividend of $30 per share in the year after. Mrs. Donna holder has 50 shares of $30 per share in STL Inc. She wishes to limit her income from investments to no more than $35 the year after. Mrs. Donna Holder has 50 shares in STL Inc. She wishes to limit her income from investments to no more than $35 in the first year. Demonstrate through relevant computations, how she can achieve this goal through homemade dividends if the required return on STL Inc’s shares is 9%. What will be Mrs. Holder’s earning in the second year? Show detailed workings in support of your response.
Sooner-than Later (STL) Inc. announces that it will pay a $75 per dividend next year, followed by a final dividend of $30 per share in the year after. Mrs. Donna holder has 50 shares of $30 per share in STL Inc. She wishes to limit her income from investments to no more than $35 the year after. Mrs. Donna Holder has 50 shares in STL Inc. She wishes to limit her income from investments to no more than $35 in the first year. Demonstrate through relevant computations, how she can achieve this goal through homemade dividends if the required return on STL Inc’s shares is 9%. What will be Mrs. Holder’s earning in the second year? Show detailed workings in support of your response.
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