- February 24, 2020 at 3:47 pm
GXG Co is an e-business which designs and sells computer applications (apps) for mobile phones. The company
needs to raise $3,200,000 for research and development and is considering three financing options.
GXG Co could suspend dividends for two years, and then pay dividends of 25 cents per share from the end of the
third year, increasing dividends annually by 4% per year in subsequent years. Dividends in recent years have grown
by 3% per year.
Hi, In the marking scheme, the calculation is done based on the dividend being paid in the second year and not for the third yeard but in the question, it says that the payment of dividends is being suspended for 2 years and the dividend is being paid in the third year.
I am really confused about why that is or am I misunderstanding the question?
Thanks.February 25, 2020 at 3:34 am
I think you are misunderstanding the answer (which is correct).
I do go through this sort of problem in my free lectures. Also if you read the whole of the posts on the following link it should explain the problem 🙂
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