Which plan will provide the higher present value

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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.

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 10 percent; the discount rate for plan B is 12 percent. Which plan will provide the higher present value for the future dividends? (Round to two places to the right of the decimal point.)

Reference no: EM131792468

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