A firm uses a target payout ratio of

0.49.

In recent years, its earnings per share (EPS) has been

$4.22

and using that EPS, it has just paid its annual dividend of

$2.07

per share. One year from now, the firm expects its EPS to increase to

$4.97

but does not believe that the entire increase in its earnings is permanent. It intends to select its dividend amount according to the Lintner model, using a speed of adjustment coefficient of

0.62.

Question content area bottom

Part 1

Part

A:

What dividend will the firm issue in one year?Dividend in one year:

$enter your response here

per share.(Enter your answer rounded to two decimal places and use the rounded value in Part B).Part

B:

If the EPS remains at its higher value for an additional year, what dividend will the firm issue in two years?Dividend in two years:

$enter your response here

per share.(Enter your answer rounded to two decimal places).