3. Challenging Questions (30 marks). The revenue of a firm is highly likely to be affected...

Transcribed Image Text:

3. Challenging Questions (30 marks). The revenue of a firm is highly likely to be affected by business cycles. The CFO of Company ABC decides to have a dividend policy that is coordinating to business cycles. Specifically, the company will give more dividend when the economy is in the growing stage and less dividend when the economy is in recession. At the moment, the CFO thinks we will have business cycles in every 10 years. After careful thoughts, the CFO comes up with the following dividend payout plan: 't Dt = 2 sin +10 5 where Dt is the dividend payment at year t, = 3.1415926, and sin (.) is the sine function. The required rate of return r =10%. a. Calculate the dividend payment for this company for the next 20 years. [5 marks] 3. Challenging Questions (30 marks). The revenue of a firm is highly likely to be affected by business cycles. The CFO of Company ABC decides to have a dividend policy that is coordinating to business cycles. Specifically, the company will give more dividend when the economy is in the growing stage and less dividend when the economy is in recession. At the moment, the CFO thinks we will have business cycles in every 10 years. After careful thoughts, the CFO comes up with the following dividend payout plan: 't Dt = 2 sin +10 5 where Dt is the dividend payment at year t, = 3.1415926, and sin (.) is the sine function. The required rate of return r =10%. a. Calculate the dividend payment for this company for the next 20 years. [5 marks]