Suppose Roget's Search Engine, from the previous problem, decides to forgo the dividend payments in Years 1

Question:

Suppose Roget's Search Engine, from the previous problem, decides to forgo the dividend payments in Years 1 and 2 and instead reinvest the funds in additional projects available to the firm. Demonstrate whether or not the suspension of dividends is appropriate under the following assumptions:
a. Reinvested funds earn 8 percent.
b. Reinvested funds earn 10 percent.
c. Reinvested funds earn 12 percent.

Data from Previous Problem

Roget's Search Engine Limited plans to pay dividends of $2.00, $3.50, and then a liquidating dividend of $20.25 over the next three years.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...

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