Foundations of Financial Management
Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
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Chapter 18, Problem 9P

In doing a five-year analysis of future dividends, the Dawson Corporation is considering the following two plans. The values represent dividends per share.

Chapter 18, Problem 9P, In doing a five-year analysis of future dividends, the Dawson Corporation is considering the

a. How much in total dividends per share will be paid under each plan over the 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 11 percent; the discount rate for Plan B is 14 percent. Compute the present value of future dividends. Which plan will provide the higher present value for the future dividends? (Round to two places to the right of the decimal point.)

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Dividend disocunt model (DDM); Author: Edspira;https://www.youtube.com/watch?v=TlH3_iOHX3s;License: Standard YouTube License, CC-BY