#$3(10$ points$)$

InTech, a computer software firm that has never paid dividends before, is considering whether it

should start doing so$.$ This firm has a cost of equity of $22$ percent and a cost of debt of $10$ percent

$($the tax rate is $35$ percent$).$ The firm has $$100$ million in debt outstanding and $50$ million shares

outstanding, selling for $$10$ per share. The firm currently has net income of $$90$ million and

depreciation charges of $$10$ million. It also has the following projects available:

The firm plans to finances its future capital investment needs using $20$ percent debt.

a$.$ Which of these projects should the firm accept?

b$.$ How much $($if any$)$ should the firm pay out as dividends?