A firm is evaluating its capital budget at a time when it wants to avoid issuing any new common stock. The firm is forecasting EPS of $3.00 for the coming year on 500,000 outstanding shares of stock. The capital budget is forecast to be $800,000, and the company is committed to maintaining a dividend of $2.00 per share.

A. Given these constraints, how much will the firm need to borrow?

B. What percentage of the capital budget will be financed with debt?