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 $0.60 2 1.60 2.20 3 1.60 0.30 4 1.90 4.20 5 1.90 2.00 a. 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.) Plan A Plan B Total Dividends 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 9 percent; the discount rate for Plan B is 11 percent. Compute the present value of future dividends. (Do not round intermediate calculations and round your answers to 2 decimal places.) Plan A Plan B Present Value of Future Dividends b-2. Which plan will provide the higher present value for the future dividends? O Plan A O Plan B A financial analyst is attempting to assess the future dividend policy of Environmental Systems by examining its life cycle. She anticipates no payout of earnings in the form of cash dividends during the development stage (I). During the growth stage (II), she anticipates 18 percent of earnings will be distributed as dividends. As the firm progresses to the expansion stage (III), the payout ratio will go up to 40 percent and will eventually reach 59 percent during the maturity stage (IV). a. Assuming earnings per share will be as follows during each of the four stages, indicate the cash dividend per share (if any) during each stage. (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and round your answers to 2 decimal places.) Stage I Stage II $0.20 1.55 Stage III 2.80 Stage IV 3.80 Dividends Stage I Stage II Stage III Stage IV b. Assume in Stage IV that an investor owns 295 shares and is in a 15 percent tax bracket. What will be the investor's aftertax income from the cash dividend? (Do not round intermediate calculations and round your answer to 2 decimal places.) Aftertax income c. In what two stages is the firm most likely to utilize stock dividends or stock splits? (Select two answers. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) ? Stage I ? Stage II 22 ? Stage III ? Stage IV Wilson Pharmaceuticals' stock has done very well in the market during the last three years. It has risen from $45 to $70 per share. The firm's current statement of stockholders' equity is as follows: Common stock (3 million shares issued at par value of $10 per share) Paid-in capital in excess of par Retained earnings Net worth $30,000,000 19,000,000 46,000,000 $95,000,000 a-1. How many shares would be outstanding after a two-for-one stock split? (Do not round Intermediate calculations. Input your answer in millions (e.g., $1.23 million should be entered as "1.23").) Answer is complete but not entirely correct. Number of shares 6,000,000 million a-2. What would be its par value? (Do not round Intermediate calculations and round your answer to 2 decimal places.) Par value Answer is complete and correct. 5.00 b-1. How many shares would be outstanding after a three-for-one stock split? (Do not round intermediate calculations. Input your answer in millions (e.g., $1.23 million should be entered as "1.23").) Answer is complete but not entirely correct. Number of shares 9,000,000 million b-2 What would be its par value? (Do not round intermediate calculations and round your answer to 2 decimal places.) Answer is complete and correct. Par value $ 3.33 c. Assume that Wilson earned $12 million. What would its earnings per share be before and after the two- for-one stock split? After the three-for-one stock split? (Do not round Intermediate calculations and round your answers to 2 decimal places.) Answer is complete and correct. EPS before $ 4.00 EPS after 2-for-1 split $ 2.00 - EPS after 3-for-1 split $ 1.33 d. What would be the price per share after the two-for-one stock split? After the three-for-one stock split? (Assume that the price-earnings ratio of 17.50 stays the same.) (Do not round Intermediate calculations and round your answers to 2 decimal places.) Answer is complete and correct. Price after 2-for-1 split $ 35.00 Price after 3-for-1 split $ 23.33