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Problem:

ABC firm has a debt to equity ratio of 2.3 and new investments would cost $35 million this year. The firm expects earnings of $12 million this year.

Required:

Question 1: Calculate the dividends paid and external financing required if the firm follows a residual dividend policy.

Question 2: Calculate the dividends paid and external financing required if the firm has a fixed payout ratio of 25%.

Note: Explain all calculation and formulas.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91162507

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