Dugbog Imports Inc. expects earnings of $10 million next year. Its dividend payout ratio is 30.00 percent, and its debt ratio is 40.00 percent. The firm uses no preferred stock.

a. How much will the firm pay in dividends next year?

b. What amount of additional retained earnings does the firm expect next year?

c. At what amount of total financing will there be a break point in the MCC schedule because of an increase in the component cost of equity?

d. The firm can borrow $7.50 million at an interest rate of 8.00 percent, but additional borrowing up to $12.50 million will require a rate of 9.75 percent, and above $12.50 million, additional debt will cost 11.50 percent. At what points will rising debt costs cause breaks in the MCC schedule?