Lane Industries is considering three independent projects, each
of which requires a $2.5 million investment. The...
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Finance
Lane Industries is considering three independent projects, eachof which requires a $2.5 million investment. The estimated internalrate of return (IRR) and cost of capital for these projects arepresented here:
Project H (high risk):
Cost of capital = 15%
IRR = 17%
Project M (medium risk):
Cost of capital = 10%
IRR = 8%
Project L (low risk):
Cost of capital = 7%
IRR = 8%
Note that the projects' costs of capital vary because theprojects have different levels of risk. The company's optimalcapital structure calls for 40% debt and 60% common equity, and itexpects to have net income of $3,900,000. If Lane establishes itsdividends from the residual dividend model, what will be its payoutratio? Round your answer to 2 decimal places. %
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