In 2020, Keenan Company paid dividends totaling $3,660,000 on net income of $18 million. Note that 2020 was a normal year and that for the past 10 years, earnings have grown at a constant rate of 8%. However, in 2021, earnings are expected to jump to $25.2 million and the firm expects to have profitable investment opportunities of $12.96 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 8% 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.

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.

It uses a pure residual dividend policy (40% of the $12.96 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.

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- (1-4)

Assume that investors expect Keenan to pay total dividends of $6,000,000 in 2021 and to have the dividend grow at 8% after 2021. The stock's total market value is $210 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 ROE = (1.0 - 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?