Epsilon, Inc. finances 30% of its investments with debt and 70% with common equity. Currently, the firm has generated $3 million from operations that can be used to finance the common equity portion of new investments or to pay common dividends. Epsilon uses a residual dividend policy.

If Epsilon has $3 million in positive NPV investment opportunities that it can accept without increasing its marginal cost of capital, then:

Group of answer choices

a)Epsilon will accept less than the $3 million in projects so it can pay a dividend.

b)Epsilon will pay $900,000 in dividends.

c)Epsilon will have to issue new common equity to be able to invest in all positive NPV projects.

d)Epsilon will pay no dividends.