Dividend Smoothing.Microsoft Corporation (MSFT) uses a target payout ratio of 0.32. In recent years, its earnings per share (EPS) has been $ and using that EPS, it has just paid $4.89 its annual dividend of $1.56 per share. One year from now, MSFT expects its EPS to increase to $ 5.57 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 0.39.

What dividend will MSFT issue in one year?

A.

$1.67per share

B.

$1.69per share

C.

$1.55per share

D.

$1.65per share

E.

$1.73per share