A company is considering the following 4 mutually exclusive projects (as shown in the below table). The projects are of equal risks and therefore, same Cost of Capital, which is 12%. The company would like to maintain its capital structure that is comprised of 3/4 debt and the remainder as Common Equity. Its net income is expected to be $4,000,000.

11) Eventually, if the company has been following a residual dividend policy, what will its payout ratio be? *

6 points

18.750%

81.250%

40.625%

34.375%

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