Problem $4(28$ marks$)$ Carter Construction Company has a debt to equity ratio of $3.$ New

investments for the year would cost $$36$ million. The firm expects net earnings of $$12$ million

this year.

a$)$ Calculate the debt and equity financing required for the new investments, dividends paid, and

external debt and equity financing required if the firm follows a residual dividend policy and

wants to maintain its debt to equity ratio. $(12$ marks$)$

b$)$ Calculate the dividends paid and external debt and equity financing required if the firm has a

fixed payout ratio of $60\%$ and it wants to maintain its debt to equity ratio. $(8$ marks$)$

c$)$ Calculate the dividends paid and external debt and equity financing required if the firm has a

policy of growing dividend at a steady rate of $3\%$ every year and it wants to maintain its debt to

equity ratio. The last dividends paid are equal to $$10$ million. $(8$ marks$)$