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Texmex Corp. has promised to pay all of it retained earnings as dividend in the amount of $14,000 over the next four years and then
Texmex Corp. has promised to pay all of it retained earnings as dividend in the amount of $14,000 over the next four years and then shut down (Plan 1). If the required rate of return on its common stock is 10% answer the following question. Show all the calculations clearly. a) If its investors require a dividend of $10,000 in the first three years, what strategy can the firm employ to fulfill that demand (Plan 2)? What is the dividend amount firm will pay in the final year? c) Calculate the PV of the dividends for both the dividend plans.
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