In doing a five-year analysis of future dividends, the Dawson Corporation is considering the following two...

50.1K

Verified Solution

Question

Finance

In doing a five-year analysis of future dividends, the DawsonCorporation is considering the following two plans. The valuesrepresent dividends per share. Use Appendix B for an approximateanswer but calculate your final answer using the formula andfinancial calculator methods. Year Plan A Plan B 1 $ 1.10 $ .10 21.10 1.60 3 1.10 .20 4 1.50 3.50 5 1.50 1.60 a. How much in totaldividends per share will be paid under each plan over five years?(Do not round intermediate calculations and round your answers to 2decimal places.) b-1. Mr. Bright, the vice president of finance,suggests that stockholders often prefer a stable dividend policy toa highly variable one. He will assume that stockholders apply alower discount rate to dividends that are stable. The discount rateto be used for Plan A is 11 percent; the discount rate for Plan Bis 13 percent. Compute the present value of future dividends. (Donot round intermediate calculations and round your answers to 2decimal places.) b-2. Which plan will provide the higher presentvalue for the future dividends? Plan A Plan B

Answer & Explanation Solved by verified expert

3.9 Ratings (368 Votes)

See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

In doing a five-year analysis of future dividends, the DawsonCorporation is considering the following two plans. The valuesrepresent dividends per share. Use Appendix B for an approximateanswer but calculate your final answer using the formula andfinancial calculator methods. Year Plan A Plan B 1 $ 1.10 $ .10 21.10 1.60 3 1.10 .20 4 1.50 3.50 5 1.50 1.60 a. How much in totaldividends per share will be paid under each plan over five years?(Do not round intermediate calculations and round your answers to 2decimal places.) b-1. Mr. Bright, the vice president of finance,suggests that stockholders often prefer a stable dividend policy toa highly variable one. He will assume that stockholders apply alower discount rate to dividends that are stable. The discount rateto be used for Plan A is 11 percent; the discount rate for Plan Bis 13 percent. Compute the present value of future dividends. (Donot round intermediate calculations and round your answers to 2decimal places.) b-2. Which plan will provide the higher presentvalue for the future dividends? Plan A Plan B