If investors see no difference in the risk between the two policies, and therefore apply a 9.4% discount rate to both policies, what is the present value of each dividend stream?
  

Transcribed Image Text:

A company is considering the following two dividend policies for the next five years. Policy #1 Policy #2 4.00 Year 1 2 3 4 5 4.00 4.00 4.00 4.00 6.90 2.40 5.00 1.70 4.00 A company is considering the following two dividend policies for the next five years. Policy #1 Policy #2 4.00 Year 1 2 3 4 5 4.00 4.00 4.00 4.00 6.90 2.40 5.00 1.70 4.00

Answer rating: 100% (QA)

To calculate the present value PV of each dividend stream well need to discount each future dividend ... View the full answer