Merrillan Motors had earnings of $8 million last year. It made $5 million on investment in projects with positive net present values. Pat Collins owns 20% of the firm’s common stock. Assume that Pat desires no change in proportional ownership of Merrillan and the firm wishes to maintain a constant debt-equity ratio.

What will be Pat’s action in response to

a. Merrillan’s paying out dividends of $5 million?

b. Merrillan’s paying out dividends of $1 million?

c. Merrillan’s paying out dividends of $3 million?

Please see our guidelines in red print at the top of this page on posting homework problems:

https://www.askmehelpdesk.com/finance-accounting/announcement-font-color-ff0000-u-b-read-first-expectations-homework-help-board-b-u-font.html