Marks plc and Spencer plc both base their dividend policy on the Lintner model. Both

firms have a target payout rate of $40\%.$ Marks plc$’$s adjustment rate is $0\mathrm{.}2$ and Spencer

plc$’$s adjustment rate is $0\mathrm{.}8.$ Both firms paid a dividend of $14\mathrm{.}7$ pence per share in $2019$

and have identical EPS in recent years:

Year $202020212022$

EPS $($pence$)31\mathrm{.}527\mathrm{.}935\mathrm{.}5$

Required:

$($i$)$ Calculate the annual dividend per share and the actual payout ratio for both firms.

$($ii$)$ Explain the Lintner model and the function of the adjustment rate.

$($iii$)$ Define and explain the clientele effects and the signalling effects of dividend policy.