31. Flavortech Inc. expects EBIT of $2,000,000 for the coming year. The firm's capital structure consists of 40% debt and 60% equity, and its marginal tax rate is 40%. The cost of equity is 14%, and the company pays a 10% rate on its $5,000,000 of long-term debt. One million shares of common stock are outstanding. In its next capital budgeting cycle, the firm expects to fund one large positive NPV project costing $1,200,000, and it will fund this project in accordance with its target capital structure. Assume that new debt will have an interest rate of 10%. If the firm follows a residual dividend policy and has no other projects, what is its expected dividend payout ratio? a. 82.6% b. 60.0% c. 40.0% d. 17.4% e. None of the above 31. Flavortech Inc. expects EBIT of $2,000,000 for the coming year. The firm's capital structure consists of 40% debt and 60% equity, and its marginal tax rate is 40%. The cost of equity is 14%, and the company pays a 10% rate on its $5,000,000 of long-term debt. One million shares of common stock are outstanding. In its next capital budgeting cycle, the firm expects to fund one large positive NPV project costing $1,200,000, and it will fund this project in accordance with its target capital structure. Assume that new debt will have an interest rate of 10%. If the firm follows a residual dividend policy and has no other projects, what is its expected dividend payout ratio? a. 82.6% b. 60.0% c. 40.0% d. 17.4% e. None of the above