A firm follows a strict residual dividend policy. This firm will have profits of $500,000 this year. After screening all available investment projects, the firm has decided to take three out of the 10 projects and those three will cost $410,000. The current equity market value of this firm is $5,000,500 and the current market price of its shares is $45.60. Estimate the current year dividend per share. What is the shortcoming of this policy?
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