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In doing a five - year analysis of future dividends, the Dawson Corporation is considering the following two plans. The values represent dividends per share.
In doing a fiveyear 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.
Year Plan A Plan B
$ $
a How much in total dividends per share will be paid under each plan over five years?
Note: Do not round intermediate calculations and round your answers to decimal places.
Total Dividends
Plan A
plan B
b Mr Bright, the VicePresident 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 percent; the discount rate for Plan B is percent. Compute the present value of future dividends.
Note: Do not round intermediate calculations and round your answers to decimal places.
Present Value of Future Dividends
Plan A
Plan B
b Which plan will provide the higher present value for the future dividends?
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