Suppose that ABC Company forecasted its next year net income to be $2,400,000. As part of its continuous expansion projects, the company has allotted $3,200,000 for its capital budget. The company aims to maintain a 50% equity target in all of its financing. The company has 500,000 outstanding common stock shares. Over the past five years, the company has paid a $2 per share dividend. Required?

Based on the residual dividend model, calculate the dividend per share and dividend payout ratio of the company.

If ABC wants to maintain the $2 dividend per share, how much retained earnings will be available for the firm's capital budget?

Suppose that the equity target is revised to 40%. Does this change affect the dividend per share and retained eamings of the company? Show your workings.

How much income should the company retain and how much dividend should be distributed if the equity target is increased to 60%?