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	$1,125,000
Interest rate	10%		% Debt	40%
Debt outstanding	$5,000,000		% Equity	60%
Shares outstanding	5,000,000		Tax rate	25%

Select the correct answer.

a. 38.78%

b. 40.00%

c. 39.39%

d. 40.61%

e. 41.22%