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Ashwood Industries is reviewing their capital expenditure projects for the year. The estimated total cost of new investments would be $100 million. Ashwood Industries expects
Ashwood Industries is reviewing their capital expenditure projects for the year. The estimated total cost of new investments would be $100 million. Ashwood Industries expects net income to be $35 million this year. They wish to maintain their current debt-to-equity ratio of 1.25 a) Calculate the dividends paid and total external equity & debt financing required if the firm follows a residual dividend policy. (6 marks) b) Calculate the dividends paid and external equity & debt financing required if the firm has a fixed payout ratio of 15% (4 marks)
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