Over the past 10 years, a firm has had the earnings per share shown in the following table.

a. If the firm’s dividend policy were based on a constant payout ratio of 40% for all years with positive earnings and 0% otherwise, what would be the annual dividend for each year?
b. If the firm had a dividend payout of $1.00 per share, increasing by $0.10 per share whenever the dividend payout fell below 50% for 2 consecutive years, what annual dividend would the firm pay each year?
c. If the firm’s 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 $3.00 would be paid, what annual dividend would the firm pay each year?
d. Discuss the pros and cons of each dividend policy described in parts a through c.

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Year Earnings per share Year Earnings per share $2.40 $4.00 2019 2014 2018 3.80 2013 1.20 2012 3.20 2017 1.80 2016 2011 -0.50 0.25 2.80 2015 3.20 2010