Merrillan Motors had earnings of $8 million last year. It made $5 million of investments 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
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