1. In 2020, Keenan Company paid dividends totaling $3,600,000 on net income of $10.8 million. Note that 2020 was a normal year and that for the past 10 years, earnings have grown at a constant rate of 10%. However, in 2021, earnings are expected to jump to $14.4 million and the firm expects to have profitable investment opportunities of $8.4 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 10% growth rate. Keenan's target capital structure is 40% debt and 60% equity.

1. Which of the preceding policies would you recommend? Restrict your choices to the ones listed but justify your answer.