Question

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 $ 1.20 $ 0.20 2 1.20 1.40 3 1.20 0.20 4 1.50 4.10 5 1.50 1.60 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.) 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. (Do not round intermediate calculations and round your answers to 2 decimal places.) b-2. Which plan will provide the higher present value for the future dividends?

Answer #1

a)

Value of total Dividend of plan A = 1.2+1.2+1.2+1.5+1.5

= $6.6

Value of total Dividend of plan B = 0.2+1.4+0.2+4.1+1.6

= $ 7.5

b-1)

Present Value of dividend of Plan A

Present Value of dividend of Plan B

b-2) **Plan A would provide higher present value than plan
B**

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
$
1.40
$
0.60
2
1.40
2.10
3
1.40
0.50
4
1.70
4.00
5
1.70
1.50
a. How much in total dividends per share will
be paid under each plan over five...

In doing a five-year analysis of future dividends, the Dawson
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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 $ 1.80 $ 0.30 2
1.80 2.00 3 1.80 0.50 4 2.20 6.00 5 2.20 1.50
a. How much in total dividends per share will be paid under each
plan over five...

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
2
1.60
2.60
3
1.60
0.30
4
1.90
3.00
5
1.90
1.40
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20XU
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