XXX Inc predicts that earnings in the coming year will be $54 million. There are 19 million shares, and PR maintains a debt-equity ratio of 1.2.

Calculate the maximum investment funds available without issuing new equity and the increase in borrowing that goes along with it.

Suppose the firm uses a residual dividend policy. Planned capital expenditures total $74 million. Based on this information, what will the dividend per share be?

In part (b), how much borrowing will take place? What is the addition to retained earnings?