Quantitative Problem: Lane Industries is considering three independent projects, each of which requires a $3.3 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects are presented here:Project H (high risk):IRR = 18%Cost of capital = 16%Cost of capital = 11%Cost of capital = 6%Project M (medium risk):Project L (low risk):IRR = 9%IRR = 7%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 expects to have net income of $4,200,000. If Lane establishes its dividends from the residual dividend model, what will beits payout ratio? Round your answer to two decimal places.%

An investment that does not affect the investment decision of another investment alternative, is…

Quantitative Problem: Lane Industries is considering three independent projects, each of which requires a $3.3 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects are presented here: Project H (high risk): Project M (medium risk): Project L (low risk): Cost of capital - 16% Cost of capital - 11% Cost of capital - 6% 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 $4,200,000. If Lane establishes its dividends from the residual dividend model, what will be its payout ratio? Round your answer to two decimal places. IRR = 18% IRR 9% IRR = 7%

Quantitative Problem: Lane Industries is considering three independent projects, each of which requires a $3.3 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects are presented here: Project H (high risk): Project M (medium risk): Project L (low risk): Cost of capital - 16% Cost of capital - 11% Cost of capital - 6% 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 $4,200,000. If Lane establishes its dividends from the residual dividend model, what will be its payout ratio? Round your answer to two decimal places. IRR = 18% IRR 9% IRR = 7%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 13P

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DEVCON INDUSTRIES LIMITED Income Statement For the years ended Dec. 31, 2018 and 2019 2018 2019 s000's so00's Sales 900000 1125000 Cost of Goods Sold 300000 306600 Gross Profit 600000 818400 Selling and Administrative Expenses 150000 156000 Depreciation Expense 54000 57000 Advertising Expenses 18000 21000 Earnings Before Interest and Taxes Interest Expense 378000 584400 3000 3000 Taxable Income 375000 581400 Taxation (35%) 131250 203490 Net Income 243750 377910 Dividends (40%) 97500 151164 Addition to Retained Earnings 146250 226746 Additional Information Share Price 21 27.3 Ordinary Shares Outstanding 120000000 144000000 DEVCON INDUSTRIES LIMITED Statement of Financial Position As at Dec. 31, 2018 and 2019 2019 s000's ASSETS 2018 LIABILITIES & EQUITY 2018 2019 Current Assets so00's Current Liabilities so00's s000's Inventories 264000 276000 Accounts Payables Notes Payables 138000 114000 Accounts Receivables 294000 330000 150900 132654 Cash and Equivalents 210900 270000 288900 246654…