AlternativeDividend Policies

Boehm Corporation hashad stable earnings growth of 7% a year for the past 10 years, andin 2019 Boehm paid dividends of $2 million on net income of $5million. However, net income is expected to grow by 30% in 2020,and Boehm plans to invest $3.5 million in a plant expansion. Thisone-time unusual earnings growth won't be maintained, though, andafter 2020 Boehm will return to its previous 7% earnings growthrate. Its target debt ratio is 33%. Boehm has 1 million shares ofstock.

1. Calculate Boehm's dividend pershare for 2020 under each of the following policies:
   1. Its 2020 dividend payment isset to force dividends per share to grow at the long-run growthrate in earnings. Round your answer to the nearest cent.

      $  

   2. It continues the 2019 dividendpayout ratio. Round your answer to the nearest cent.

      $  

   3. It uses a pure residual policywith all distributions in the form of dividends (33% of the $3.5million investment is financed with debt). Round your answer to thenearest cent.

      $  

   4. It employs aregular-dividend-plus-extras policy, with the regular dividendbeing based on the long-run growth rate and the extra dividendbeing set according to the residual policy. What will the extradividend be? Round your answer to the nearest cent.

      $