When a firm is deciding how much cash to distribute to stockholders, it should consider two things (1) The evening objective is to mamice shareholder value and (2) them canows belong to shareholders, income shouldn't be retained unless management can rest those earnings tiherrates of return the shareholders can earn themselves. The Geet model to the dividend pold equal to net income minus the amount of retained earnings necessary to finance the firm's optimal capital budget. It can be expressed in equation formats Dividends - Net Income Target aty ratio) al capital budget) Because investment opportunities and earnings will vary from year to year, strict adherence to this model would result in fluctuating, unstable dividends. However, investors prefer table dependare dividends. Consequently, firms should use this model to help set their long-run target payout ratios, but not as a guide to the payout in any one year Quantitative Problem: Lane Industries is considering three independent projects, each of which reguires a $2.7 mmon investment. The estimated internal rate of return (IRR) and cost of capital for these projects are presented here Project H Chigh risk) Cost of capital -15% IRR = 179 Project M (medium risk): Cost of capital 996 IRR = 796 Project L (low risk) Cost of capital 8% IRR = 99 Note that the projectscosts 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 be it payout Round your answer to two decimal places