Dividend Policy Decisions Friendly Corp had a banner year with earnings of $3 million. Those earnings caused his retained earnings balance to increase to $5 million.

Cash. $250,000
Accounts Payable. 350,000
Accounts receivable 500,000
Goodwill 1,850,000
Property, Plant and Equipment 6,000,000

L/T Debt 1,250,00
Common Stock 2,000,000
Retained Earnings 5,000,000

 Necessary

a. Should the board declare a $1 million cash dividend in 6 months because of their record earnings year? 

b. Assuming Friendly Corp pays out $1 million in cash dividends, what would the earnings retention rate be? Why is this metric important? 

C. If the stock price is $50, would you buy this stock? Because?