Maintaining a debt/equity ratio of 1:4 and using a residual dividend policy, a company has estimated that earnings will be $20 million. There are 2 million shares outstanding.

A) What is the maximum amount of capital expenditures possible without issuing new equity?

B) If planned capital expenditures total $24 million, will the company pay a dividend? If yes, how much is to be paid per share? If not, why?

C) If the company has declared a dividend of $1 per share, how much debt should the company take for new investment projects? Note: capital expenditures may not be the same as in part (b)