Gaston Groceries is reviewing their capital expenditure projects for the year. The estimated total cost of new investments would be $150 million. Gaston Groceries expects net income to be $40million 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.

b) Calculate the dividends paid and external equity & debt financing required if the firm has a fixed payout ratio of 15%