eBook Problem Walk$-$Through

Walsh Company is considering three independent projects, each of which requires a $$3$ million investment. The estimated internal rate of return $($IRR$)$ and cost of capital for these projects are presented here:

Project H $($high risk$)$: Cost of capital $=16\%$ IRR $=18\%$

Project M $($medium risk$)$: Cost of capital $=12\%$ IRR $=13\%$

Project L $($low risk$)$: Cost of capital $=7\%$ IRR $=9\%$

Note that the projects' costs of capital vary because the projects have different levels of risk. The company's optimal capital structure calls for $50\%$ debt and $50\%$ common equity, and it expects to have net income of $$13,268,500.$ If Walsh establishes its dividends from the residual dividend model, what will be its payout ratio? Round your answer to two decimal places.