This is a more difficult but informative problem. James Brodrick & Sons, Incorporated, is growing rapidly and, if at all possible, would like to finance its growth without selling new equity. Selected information from the companys five-year financial forecast follows.

Year	1	2	3	4	5

Earnings after tax ($ millions)	100	130	170	230	300

Capital investment ($ millions)	180	300	300	372	550

Target book value debt-to-equity ratio (%)	140	140	140	140	140

Dividend payout ratio (%)	?	?	?	?	?

Marketable securities ($ millions)	220	220	220	220	220

(Year 0 marketable securities = $220 million)

a. According to this forecast, what dividends will the company be able to distribute annually without raising new equity and while maintaining a balance of $220 million in marketable securities? What will the annual dividend payout ratio be? (Hint: Remember sources of cash must equal uses at all times.)

Note: Round dividends to the nearest million dollars and the payout ratio % to the nearest ones place.

Year ($ Millions)

1 2 3 4 5

Dividends (Millions) ? ? ? ? ?

Dividend Payout Ratio (%) ? ? ? ? ?