Boehm Corporation has had stables earning growth of 8 % a year for the past 10 years and in 2013. Boehm paid dividends of 2.6 million on net income of $9.8 million. however in 2014 earning are expected to jump tp 12.6 million and Boehm plans to invest 7.3 million in a plant expanision . this one time usual earring growth wont be maintained though and after 2014 Boehm will return to its previous 8 % earning growth rate. it target debt ratio is 35%.

a. calcualute boehms total dividends for 2014 under each of the following policies?

1. its 2014 dividend payment is set to force dividends to grow at the long run growth rate in earning

2. it continues the 2013 dividend payout ratio

3. it uses a pure residual policy with all distribution in the form of dividends (35 % of the $7.3 million investment is financial with debt)

4.. it employs a reqular dividend plus extras policy with the reqular dividend being based on the long run growth rate and the extra dividend being set according to the residual policy.

b which of the preceding policies would you recommend? restrict your choices to the ones listed, but justify you anwers

do a 2014 dividend of 9 million seem reasonable in view your answers to parts a and b? if not, should the dividend be higher or lower