1. ABC Ltd expects with some degree of certainty to generate the following net income and to have the following capital expenditures during the next 5 years.

Year	1	2	3	4	5
Net income Sh. 000	2,000	1,500	2,500	2,300	1,800
Capital expenditure. Sh. 000	1,000	1,500	2,000	2,500	2,000

The company has 1,000,000 million ordinary shares and pays dividends of sh. 1.0 per share.

Required

1. The dividend per share and external financing are required in each year if the dividend policy of the firm is treated as a residual decision. (4 marks)
2. The amount of external financing in each year that would be necessary if the present dividend per share is maintained. (4 marks)

The amount of external financing in each year that would be necessary if a dividend payout ratio of 50% is maintained.