The Beta-Alpha Company expects with some degree of certainty to generate the following net income and to have the following capital expenditures during the next 5 years (in thousands):

Year I 2 3 4 5 Net income $2,000 $1,500 $2,500 $2,300 $1,800 Capital expenditures 1,000 1,500 2,000 1,500 2,000 The company currently has 1 million shares of common stock outstanding and pays dividends of $1 per share.

a. Determine dividends per share and external financing required in each year if dividend policy is treated as a residual decision.

b. Determine the amounts of external financing in each year that will be necessary if the present dividend per share is maintained.

c. Determine dividends per share and the amounts of external financing that will be necessary if a dividend-payout ratio of 50 percent is maintained.

d. Under which of the three dividend policies are (1) aggregate dividends maximized? (2) external financing minimized?