In doing a five-year analysis of future dividends, the Dawson Corporation is con
ID: 2739596 • Letter: I
Question
In doing a five-year analysis of future dividends, the Dawson Corporation is considering the following two plans. The values represent dividends per share. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
How much in total dividends per share will be paid under each plan over five years? (Do not round intermediate calculations and round your answers to 2 decimal places.)
Mr. Bright, the Vice-President of Finance, suggests that stockholders often prefer a stable dividend policy to a highly variable one. He will assume that stockholders apply a lower discount rate to dividends that are stable. The discount rate to be used for Plan A is 8 percent; the discount rate for Plan B is 12 percent. Compute the present value of future dividends. (Do not round intermediate calculations and round your answers to 2 decimal places.)
In doing a five-year analysis of future dividends, the Dawson Corporation is considering the following two plans. The values represent dividends per share. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
Explanation / Answer
a)
b1) Present Value of Future Dividends
Plan A
Plan B
b2) Plan A will provide the higher present value for the future dividends.
Year Plan A Plan B 1 1.9 0.6 2 1.9 2.3 3 1.9 0.2 4 2.4 5 5 2.4 1.6 Total dividend oer share 10.5 9.7Related Questions
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