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In $2020,$ Keenan Company paid dividends totaling $$2,050,000$ on net income of $$11\mathrm{.}1$ million. Note that $2020$ was a normal year and that for the past $10$ years, earnings have grown at a constant rate of $7\%.$ However, in $2021,$ earnings are expected to jump to $$19\mathrm{.}98$ million and the firm expects to have profitable investment opportunities of $$8\mathrm{.}658$ million. It is predicted that Keenan will not be able to maintain the $2021$ level of earnings growth because the high $2021$ earnings level is attributable to an exceptionally profitable new product line introduced that year. After $2021,$ the company will return to its previous $7\%$ growth rate. Keenan's target capital structure is $40\%$ debt and $60\%$ equity.

Calculate Keenan's total dividends for $2021$ assuming that it follows each of the following policies:

Its $2021$ dividend payment is set to force dividends to grow at the long$-$run growth rate in earnings. Write out your answers completely. For example, $25$ million should be entered as $25,000,000.$ Round your answer to the nearest cent.

$

$2,206,500$

It continues the $2020$ dividend payout ratio. Write out your answers completely. For example, $25$ million should be entered as $25,000,000.$ Do not round intermediate calculations. Round your answer to the nearest cent.

$

$3,689,206$

It uses a pure residual dividend policy $(40\%$ of the $$8\mathrm{.}658$ million investment is financed with debt and $60\%$ with common equity$).$ Write out your answers completely. For example, $25$ million should be entered as $25,000,000.$ Round your answer to the nearest cent.

$

$7,391,300$

It employs a regular$-$dividend$-$plus$-$extras policy, with the regular dividend being based on the long$-$run growth rate and the extra dividend being set according to the residual dividend policy. Write out your answers completely. For example, $25$ million should be entered as $25,000,000.$ Round your answers to the nearest cent.

Regular$-$dividend $

Extra dividend $

Which of the preceding policies would you recommend?

$-$Select$-$

Assume that investors expect Keenan to pay total dividends of $$6,000,000$ in $2021$ and to have the dividend grow at $7\%$ after $2021.$ The stock's total market value is $$200$ million. What is the company's cost of equity? Round your answer to two decimal places.

$\%$

What is Keenan's long$-$run average return on equity? $[$Hint: g $=$ Retention rate $\backslash$times ROE $=(1\mathrm{.}0-$ Payout rate$)($ROE$).]$ Do not round intermediate calculations. Round your answer to two decimal places.

$\%$

Does a $2021$ dividend of $$6,000,000$ seem reasonable in view of your answers to parts c and d$?$ If not, should the dividend be higher or lower?

$-$Select$-$