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Problem 3 (10 marks) Gamma firm has a debt-to-equity ratio of 2.34 (that they wish to maintain) and new investments would cost $75 million this

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Problem 3 (10 marks) Gamma firm has a debt-to-equity ratio of 2.34 (that they wish to maintain) and new investments would cost $75 million this year. The firm expects earnings of $25 million this year. a) Calculate the dividends paid and external equity financing required if the firm follows a residual dividend policy. (6 marks) b) Calculate the dividends paid and external equity financing required if the firm has a fixed payout ratio of 25%. (4 marks)

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