Crum International's target capital structure calls for 60% debt and 40% equity. The company expects to have $3 million of net income this year, and 55% of the net income will be paid out in dividends. How large can the firm's capital budget be this year before it will have to issue new common stock?

Select the correct answer.

$2.6 million

$3.4 million

$1.8 million

$2.2 million

$3.0 million