3 Distributions to Shareholders Residual Dividend Model Quantitative Problem Lane Industries is considering three independent projects, each of which requires a $2 3 million investment The estimated internal rate of return (IRR) and cost of capital for these projects are presented here Project H (high risk) Cost of capital 15 IRR 17 Project M (medium risk) Cost of capital 9 IRR 7 Project L (low risk) Cost of capital 8 IRR 9 Note that the projects' costs of capital vary because the projects have different levels of risk The company's optimal capital structure calls for 40 debt and 60 common equity, and it expects to have net income of $4,100,000 If Lane establishes its dividends from the residual dividend model, what will be its payout ratio Round your answer to two decimal places

Question: 3. Distributions to Shareholders: Residual Dividend Model Quantitative Problem: Lane Industries is considering three independent projects, each of which requires a $2.3 million investment. The

3. Distributions to Shareholders: Residual Dividend Model

Quantitative Problem: Lane Industries is considering three independent projects, each of which requires a $2.3 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects are presented here:

Project H (high risk):	Cost of capital = 15%	IRR = 17%
Project M (medium risk):	Cost of capital = 9%	IRR = 7%
Project L (low risk):	Cost of capital = 8%	IRR = 9%

Note that the projects' costs of capital vary because the projects have different levels of risk. The company's optimal capital structure calls for 40% debt and 60% common equity, and it expects to have net income of $4,100,000. If Lane establishes its dividends from the residual dividend model, what will be its payout ratio? Round your answer to two decimal places.
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