Depending on Policy a
First, the total dividends and earnings for the 5 years are computed as follows:
| Number of years | After Tax Profits |
| 1 | $12,000,000 |
| 2 | $15,000,000 |
| 3 | $19,000,000 |
| 4 | $23,000,000 |
| 5 | $25,000,000 |
| Totals | $ 94,000,000 |
The next step is to have total dividends computed for the 5-year period followed by then computing the annual total dividends as follows:
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Given earnings percentage as 30%.
Total dividends = $94,000,000 * 30%
Total dividends = $28,200,000
Annual total dividends = $28,200,000/5
Annual total dividends = $5,640,000
Third step is to have dividend per share for each year computed as follows:
| Year | Total dividends | Outstanding Shares | Dividend/Share. Calculated as Total dividends/Shares |
| 1 | $5,640,000 | 4,000,000 | $1.41 |
| 2 | $5,640,000 | 4,000,000 | $1.41 |
| 3 | $5,640,000 | 4,000,000 | $1.41 |
| 4 | $5,640,000 | 4,000,000 | $1.41 |
| 5 | $5,640,000 | 4,000,000 | $1.41 |
Depending on Policy b
First, total dividends for each year needs to be computed as follows:
| Year | After Tax Profits | Formula | Total Dividends |
| 1 | $12,000,000 | (4,000,000*$0.6)= | $2,400,000 |
| 2 | $15,000,000 | (4,000,000*$0.6)= | $2,400,000 |
| 3 | $19,000,000 | (4,000,000*$0.6)= | $2,400,000 |
| 4 | $23,000,000 | (4,000,000*$0.6)+($3,000,000*0.5)= | $3,900,000 |
| 5 | $25,000,000 | (4,000,000*$0.6)+($5,000,000*0.5)= | $4,900,000 |
Second step is to have dividend per share for each year computed as follows:
| Year | Total Dividends | Outstanding Shares |
Dividend/Share Calculated as Total dividends/Shares |
| 1 | $2,400,000 | 4,000,000 | $0.600 |
| 2 | $2,400,000 | 4,000,000 | $0.600 |
| 3 | $2,400,000 | 4,000,000 | $0.600 |
| 4 | $3,900,000 | 4,000,000 | $0.975 |
| 5 | $4,900,000 | 4,000,000 | $1.225 |
Depending on Policy c
First, total dividends for each year needs to be computed as follows:
| Year | After Tax Profits | Formula | Total Dividends |
| 1 | $12,000,000 | ($12,000,000*0.4)= | $4,800,000 |
| 2 | $15,000,000 | ($15,000,000*0.4)= | $6,000,000 |
| 3 | $19,000,000 | ($19,000,000*0.4)= | $7,600,000 |
| 4 | $23,000,000 | ($23,000,000*0.4)= | $9,200,000 |
| 5 | $25,000,000 | ($25,000,000*0.4)= | $10,000,000 |
Second step is to have dividend per share for each year computed as follows:
| Year | Total Dividends | Outstanding Shares |
Dividend/Share Calculated as Total dividends/Shares |
| 1 | $4,800,000 | 4,000,000 | $1.20 |
| 2 | $6,000,000 | 4,000,000 | $1.50 |
| 3 | $7,600,000 | 4,000,000 | $1.90 |
| 4 | $9,200,000 | 4,000,000 | $2.30 |
| 5 | $10,000,000 | 4,000,000 | $2.50 |
