The Chairman of Monash Bank, in a recent board meeting, expressed concern about the bank's capital position following the launching of an aggressive corporate expansion plan. He would like the Planning Department to examine the bank's capital position. As Head of the Planning Department of the bank, you are requested to consider the following:

A) Identify and discuss the factors that will affect the bank's decision on selecting its

capital target.

B) There is a trade-off when selecting a target capital position. Explain this trade-off.

C) Explain how the bank's dividend policy can affect the availability of internal capital.

(10 + 5 + 3 = 18 marks)