CGI has a target payout ratio of 0.30.

Last years earnings per share was $10, and in accordance with the target, CGI

paid dividends of $3 per share last year.

However, earnings have jumped to $20 this year.

Because the managers do not believe that this increase is

permanent, they do not plan to raise dividends all the way

to $6(=0.3*$20).

Rather their speed of adjustment coefficient is .5

No excel, please! Please show your work so I can understand thanks.

a, What will be the dividends this year?

b, Now suppose that earnings stay at $20 next year.

What will be the dividends this year?