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15. SiriusXM, Inc. currently has 5 million common stock shares...

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15. SiriusXM, Inc. currently has 5 million common stock shares outstanding. Over the next 3 years, the firm anticipates capital expenditures that will lead to volatility in discretionary cash flow. From Year 4 on, however, the firm anticipates stable income and discretionary cash flows. You have the following forecasts of management available: $ M 1 2 3 4 Year : Net Income 10 10 8 14 Depreciation 1 1 12 Capital Expenditures 1 4 41 AWorking Capital 4Debt 0 0 0 0 Last year's (Year 0's) dividend was $0.75 per share. Which of the following is the optimal dividend policy for this firm for Years 1-3 and 4+ based on the best practices we have studied? (DPS(t) = Dividend Per Share in Year t.) To answer this question, you may find the following table helpful in framing your analysis: Year: 0 1 2 3 Total Cum. 4+ (Years 1-3) Discr. Cash Flow ($ 10 8 7 25 13 M Discr. Cash Flow/Share 2.60 Dividend/Share $0.75 2.60 a. DPS(1) = 1.05; DPS(2) = 1.30; DPS(3) = 2.65; Total DPS for Years 1-3 = 5.00 b. DPS(1) = 0.70; DPS(2) = 1.80; DPS(3) = 2.50; Total DPS for

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