Business, 24.08.2021 20:50 tjjjjjjjjjjjjjjjjjjj
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 $1.9 $.6
2 1.9 2.3
3 1.9 0.2
4 2.4 5
5 2.4 1.6
Required:
a. How much in total dividends per share will be paid under each plan over five years?
b. 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 8 percent; the discount rate for Plan B is 12 percent. Compute the present value of future dividends.
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