question archive Lane Industries is considering three independent projects, each of which requires a $1
Lane Industries is considering three independent projects, each of which requires a $1
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Lane Industries is considering three independent projects, each of which requires a $1.6 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 = 12% | IRR = 14% |
| Project M (medium risk): | Cost of capital = 11% | IRR = 9% |
| Project L (low risk): | Cost of capital = 7% | IRR = 8% |
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 $3,500,000. If Lane establishes its dividends from the residual dividend model, what will be its payout ratio? Round your answer to 2 decimal places.
_____________%
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