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How much in total dividends per share will be paid

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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

.50

2

1.60

2.60

3

1.60

.30

4

1.90

3.00

5

1.90

1.40

a. How much in total dividends per share will be paid under each plan over five years?

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.

b 2. Which plan will provide the higher present value for the future dividends?

Reference no: EM131229037

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