Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 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.
Year Plan A Plan B
1 $ 1.60 $ 0.50
21.602.60
31.600.30
41.903.00
51.901.40
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 2 decimal places.
Total Dividends
Plan A
plan B
b-1. 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 11 percent; the discount rate for Plan B is 13 percent. Compute the present value of future dividends.
Note: Do not round intermediate calculations and round your answers to 2 decimal places.
Present Value of Future Dividends
Plan A
Plan B
b-2. Which plan will provide the higher present value for the future dividends?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Financial Planning

Authors: Lawrence J. Gitman, Michael D. Joehnk, Randy Billingsley

12th Edition

1439044473, 978-1439044476

More Books

Students also viewed these Finance questions

Question

2. What are Seventh Generations four sustainability goals?

Answered: 1 week ago