16.6

and on Structure Dividendy company is considering th illion investment. The sing three inde hent. The este t r of capital for these proje 16-6 RESIDUAL DIVIDEND MODEL Welch Compar pendent projects, each of which requires mated internal rate of retum (IRR) and cost of car presented here: Cost of capital = 16% Cost of capital = 12% Cost of capital = 8% e IRR Project H (high risk): Project M (medium risk): Project L (low risk): IRR = 20% TRR = 10% IRR = 9% Note that the projects' costs of capital vary because th different levels of risk. The company's optimal capital stru 50% debt and 50% common equity, and it expects to have $7,287 500. If Welch establishes its dividends from the resi model, what will be its payout ratio? cause the projects have ital structure calls for have net income of the residual dividend