Silvana Inc. projects the following data for the coming year. If the firm follows the residual dividend policy and also maintains its target capital structure, what will its payout ratio be?

EBIT $2,000,000

Capital budget $850,000

Interest rate 10%

% Debt 40%

Debt outstanding $5,000,000

% Equity 60%

Shares outstanding $5,000,000

Tax rate 40%

a. 41.2%

b. 45.5%

c. 43.3%

d. 39.1%

e. 37.2%