9. Problem 15.09 (Alternative Dividend Policies) Book In 2017, the Keenan Company paid dividends totaling $2,220,000 on net income of $10 million. Note that 2017 wes a normal year and that for the past 10 years, earnings have grown at a constant rate of 5%. However, in 2016, earnings are expected to jump to $15 million and the firm expects to have profitable Investment opportunities of 57.1 million. It is predicted that keeran will not be able to maintain the 2018 level of earnings growth because the high 2018 earnings level is attributable to an exceptionally profitable new product line introduced that year. After 2018, the company will return to its previous 5% growth rate. Keenan's target capital structure is 40% debt and 60% equity. e. Calculate Keenen's total dividends for 2018 essuming that it follows each of the following policies: 1. Its 2018 dividend payment is set to force dividends to grow at the long-run growth rate in earnings. Write out your answers completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest cent. 2. It continues the 2017 dividend payout ratio. Write out your answers completely. For example, 25 million should be entered as 25,000,000. Do not round Intermediate calculations. Round your answer to the nearest cent. 3. It uses a pure residual dividend policy (40% of the $7.1 million investment is financed with debt and 60W with common equity). Write out your answers completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest cent. 4. It employs a regular dividend-plus-extras polley, with the regular dividend being based on the long run growth rata and the extra dividend being set according to the residual dividend policy. Write out your answers completely. For example, 25 million should be entered as 25,000,000. Round your answers to the nearest cent. Reguler-dividend Extra dividend b. Which of the preceding policies would you recommend? c. Assume that Investors axpect Keenan to pay tatal dividends of $10,000,000 in 2013 and to have the dividend grow at 5% after 2018. The stack's tatal market value is $230 millon. What is the company's cost of aquity? Round your answer to two decimal d. Whet is Keenan's long-run average return on equity? (Hint: g = Retention rate x ROE = (1.0 - Payout rete)(ROE). Do not round intermediate calculations. Round your answer to two decimal places. e. Does a 2018 dividend of $10,000,000 seem reasonable in view of your answers to parts cand d? If not, should the dividend be higher or lower? Sclect 9. Problem 15.09 (Alternative Dividend Policies) Book In 2017, the Keenan Company paid dividends totaling $2,220,000 on net income of $10 million. Note that 2017 wes a normal year and that for the past 10 years, earnings have grown at a constant rate of 5%. However, in 2016, earnings are expected to jump to $15 million and the firm expects to have profitable Investment opportunities of 57.1 million. It is predicted that keeran will not be able to maintain the 2018 level of earnings growth because the high 2018 earnings level is attributable to an exceptionally profitable new product line introduced that year. After 2018, the company will return to its previous 5% growth rate. Keenan's target capital structure is 40% debt and 60% equity. e. Calculate Keenen's total dividends for 2018 essuming that it follows each of the following policies: 1. Its 2018 dividend payment is set to force dividends to grow at the long-run growth rate in earnings. Write out your answers completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest cent. 2. It continues the 2017 dividend payout ratio. Write out your answers completely. For example, 25 million should be entered as 25,000,000. Do not round Intermediate calculations. Round your answer to the nearest cent. 3. It uses a pure residual dividend policy (40% of the $7.1 million investment is financed with debt and 60W with common equity). Write out your answers completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest cent. 4. It employs a regular dividend-plus-extras polley, with the regular dividend being based on the long run growth rata and the extra dividend being set according to the residual dividend policy. Write out your answers completely. For example, 25 million should be entered as 25,000,000. Round your answers to the nearest cent. Reguler-dividend Extra dividend b. Which of the preceding policies would you recommend? c. Assume that Investors axpect Keenan to pay tatal dividends of $10,000,000 in 2013 and to have the dividend grow at 5% after 2018. The stack's tatal market value is $230 millon. What is the company's cost of aquity? Round your answer to two decimal d. Whet is Keenan's long-run average return on equity? (Hint: g = Retention rate x ROE = (1.0 - Payout rete)(ROE). Do not round intermediate calculations. Round your answer to two decimal places. e. Does a 2018 dividend of $10,000,000 seem reasonable in view of your answers to parts cand d? If not, should the dividend be higher or lower? Sclect