In doing a fiveyear 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  $  1.80  $  .50  
2  1.80  2.20  
3  1.80  .20  
4  2.10  4.00  
5  2.10  1.40  
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.)

b1. 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 10 percent; the discount rate for Plan B
is 14 percent. Compute the present value of future dividends.
(Do not round intermediate calculations and round your
answers to 2 decimal places.)

b2. Which plan will provide the higher present
value for the future dividends?
Plan A  
Plan B 
Total DIv = Sum of Dividends
Plan A: 1.8 + 1.8 +1.8 +2.1+ 2.1
= 11.7
Plan B: 0.5 + 2.2 + 0.20 + 4.00 + 1.40
= 8.30
B1:
B2:
Plan A is selected as PV of dividends is more for Plan A.
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