4. RQC Limited is a publicly traded firm, with the following income statement and balance sheet from its most recent financial year: Income Statement Revenues $1000,000 $ 400,000 $100.000 $ 500,000 $ 100.000 Expenses Depreciation EBIT Interest Expense Taxable Income $40,000 $160.000 Net Income $240,000 Balance Sheet Assets Liabilities $ 500,000 $1,500,000 Accounts Payable $ 50,000 Long Term Debt Property, Plant & Equipment Land & Buildings $1,000,000 Current Assets $1.00000 Equity (100,000 shares) $1.500,000 Total $3.000.000 Total $3.000,000 RQC expects its revenues to grow 10% next year and its expenses to remain at 40% of revenues. The depreciation and interest expenses will remain unchanged at $100,000 next year. The working capital, as a percentage of revenue, will also remain unchanged next year. The managers of RQC claim to have several projects available to choose from next year, in which they plan to invest the funds from operations, and they suggest that the firm really should not be paying dividends. The projects have the following characteristics: Expected Annual CF to Equity Project Equity Investment Beta $ 100,000 $ 100,000 $ 50,000 $ 50,000 A 12,500 1.00 B 14,000 1.50 8,000 1.80 D 12,000 2.00 The treasury bill rate is 3%, and the treasury bond rate is 6.25%, The firm plans to finance 40% of its future net capital expenditures (Cap Ex - Depreciation) and working capital needs with debt. a. How much can the company afford to pay in dividends next year? b. Now assume that the firm actually pays out $1.00 per share in dividends next year. The current cash balance of the firm is $150,000. How much will the cash balance of the firm be at the end of next year, after the payment of the dividend? (10 marks)