Question: You are analyzing the dividend policy of Conrail a major

You are analyzing the dividend policy of Conrail, a major railroad, and you have collected the following information from the past five years.
The average debt ratio during this period was 40%, and the total non-cash working capital at the end of 1990 was $10 million.
a. Estimate how much Conrail could have paid in dividends during this period.
b. If the average return on equity during the period was 13.5% and Conrail had a beta of 1.25, what conclusions would you draw about their dividend policy? (The average Treasure bond rate during the period was 7%, and the average return on the market was 12.5% during the period.)

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