The Hastings Sugar Corporation has the following pattern of net income each year, and associated capital expenditure projects. The firm can earn a higher return on the projects than the stockholders could earn if the funds were paid out in the form of dividends.

Year	Net Income	Profitable Capital Expenditure
1	$13 Million	$7 Million
2	20 Million	12 Million
3	8 Million	6 Million
4	14 Million	8 Million
5	19 Million	9 Million

The Hastings Corporation has 3 million shares outstanding.

a. If the marginal principle of retained earnings is applied, how much in total cash dividends will be paid over the five years?

b. If the firm simply uses a payout ratio of 20 percent of net income, how much in total cash dividends will be paid?

c. If the firm pays a 20 percent stock dividend in years 2 through 5, and also pays a cash dividend of $3.40 per share for each of the five years, how much in total dividends will be paid?

d. Assume the payout ratio in each year is to be 20 percent of the net income and the firm will pay a 10 percent stock dividend in years 2 through 5, how much will dividends per share for each year be? (Assume the cash dividend is paid after the stock dividend.)

Year 1

Year 2

Year 3

Year 4

Year 5