Ove r the last 10 years a firm has had the earnings per share shown in the following table:

Year Earnings per share

2012 $4.00

2011 3.80

2010 3.20

2009 2.89

2008 3.20

2007 2.40

2006 1.20

2005 1.80

2004 -0.50

2003 0.25

A. If the firms dividend policy were based on a constant payout ration of 40% for all years with positive earnings and 0% otherwisewhat would be the annual
dividend for each year?

B. If the firm had a dividend payout of $1.00 per shareincreasing by 0.10 per share whenever the dividend payout fell below 50% for two consecutive yearswhat
annual dividend would the firm pay each year?

C. If the firms policy were to pay 0.50 per share each period except when earnings per share exceed $3.00 when an extra dividend equal to 80% of earnings
beyond 43.00 would be paidwhat annual dividend would the firm pay each year?

D. Discuss the pros and cons of each dividend policy described in parts a and c.

**FOR FULL POINTS MUST SHOW WORK & EXPLAIN IF NEEDED**