Disney currently has 5 million common stock shares outstanding. Over the next 3 years, the firm anticipates capital expenditures that will lead to...

Disney 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:

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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:

(chart attached, answers below

a.DPS(1) = 1.25; DPS(2) = 1.75; DPS(3) = 2.50; Total DPS for Years 1-3 = 5.50

b.DPS(1) = 1.10; DPS(2) = 1.50; DPS(3) = 2.25; Total DPS for Years 1-3 = 4.85

c.DPS(1) = 1.10; DPS(2) = 1.50; DPS(3) = 2.40; Total DPS for Years 1-3 = 5.00

d.DPS(1) = 1.05; DPS(2) = 1.30; DPS(3) = 2.65; Total DPS for Years 1-3 = 5.00

e.DPS(1) = 0.70; DPS(2) = 1.80; DPS(3) = 2.50; Total DPS for Years 1-3 = 5.00