Bernies Corporation has a capital budget of $2.25 million. The company wants to maintain a target capital structure which is 70% debt and 30% equity. The company forecasts that its net income this year will be $800,000.

a. If the firm uses a payout ratio of 30%, what dividend will Reed pay?

b. How much will be added to retained earnings?

c. If the company wishes to maintain its debt-equity ratio to finance the capital budget, how much debt must the firm issue?

d. How much equity must the firm issue?