1. A company has provided the following financial date:

A target capital structure that is 50% debt and 50% equity

After-tax cost of debt is 8%

Cost of retained earnings is estimated to be 13.5%

Cost of equity is estimated to be 14.5% if the company issues new common stock

Net Income is $2,500

The company is considering the following investment projects

Project	Size of Project	RR of project
A	$1,000	12%
B	$1,200	11.5%
C	$1,200	11%
D	$1,200	10.5%
E	$1,000	10%

If the company follows a residual dividend policy, what will be its payout ratio?