You have recently joined Modern Windows as the Controller. Modern is a publicly traded company in Toronto. It manufactured high quality windows. Modern is known for their innovative design and has been the market leader in Toronto. It is now January 15, 2023, and you are in the process of closing the books for 2022. Based on the financial results, you are asked to provide a recommendation and discuss how much annual dividend should be distributed to the shareholders at the upcoming Board of Directors Meeting. The dividend will be announced the day following the board meeting, and will be paid two weeks later. You are required to prepare a short memo prior to the meeting. Below is an extract of the financial results ended December 31, 2022: Current assets Current liabilities Cash $4,000,000 Accounts payable $2,000,000 Accounts receivable 5,000,000 Provisions 3,000,000 Inventory 2,000,000 Short-term loan 2,000,000 Others 3,700,000 Others 2,000,000 Total current assets 14,700,000 Total current liabilities 9,000,000 Investments (market value) 7,000,000 Bonds Payable 16,000,000 PP&E 10,500,000 Common stock 1,000,000 Intangible assets 3,500,000 Contributed surplus 4,900,000 Other assets 3,000,000 Retained earnings 7,800,000 Total non-current assets 17,000,000 Total shareholders' equity 13,700,000 Total assets $38,700,000 Total liabilities and equity $38,700,000 Sales $44,000,000 Cost of goods sold 29,400,000 Gross profit 14,600,000 Sales, general, and administration 6,000,000 costs Operating income before interest 8,600,000 Interest expenses 1,000,000 Income before tax 7,600,000 Income tax (30%) 2,300,000 As part of your preparation, you have also collected some other relevant information: Last year, net income was $4.4 million and the firm distributed $3.3 million in cash dividends. . The firm has two loan agreements (reported under "bonds payable") that require the firm to maintain at least $2.5 million in retained earnings and to maintain a debt-to-total assets ratio no higher than 0.7:1. There was no change in the number of outstanding shares during the year. Modern has distributed dividends for many years, and as the profit increased over the years, dividends were increased as well. You are currently considering 3 options: 1. Distribute similar amount of cash dividend as last year 2. Distribute a combination of cash and stock dividend. If this is the case, how much dividend should Modern consider for cash and stock dividend? 3. Increase cash dividend from previous year - Based on the current condition, what will Modern need to do to accommodate this increase in dividend distribution? Required: Prepare a memo to review the options and make a recommendation