Case $9$: Bessemer Steel Products, Inc.: Directed

$3.$ What effect does the payout policy have on the growth rate of earnings per share? Explain in terms of the formula $g=br,$ where $g$ is the growth rate, $b$ equals the percentage of earnings retained, and $r$ equals the average rate of return on equity.

$4.$ Could the figures in Table $3$ be considered proof that firms with low payout ratios have high price$/$earnings ratios? Justify your answer.

$5.$ How does a firm's debt position affect its dividend policy?

$6.$ Evaluate Harris's argument that a reduction in the dividend payout rate would increase the price of the stock versus Brady's opinion that such a reduction would drastically reduce the price of the stock.

$7.$ Would a stock dividend or a stock split be of use in this situation? Explain.

$8.$ What specific dividend policy should Dowd recommend to the board of direetors at its next meeting? Fully justify your answer.

$9.$ Prior to $1986,$ federal tax laws gave preferential treatment to capital gains income relative to ordinary income. Under the pre$-1986$ system, the top federal tax rate on ordinary income $($dividends$)$ was $50$ percent, and the top federal