Grumman's Inc. is considering three independent projects, each of which requires a $450,000 investment. The cost of capital for the projects vary because the projects have different levels of risk. Project A has estimated internal rate of return (IRR) of 12% and a cost of capital of 10%, Project B has estimated internal rate of return (IRR) of 9% and a cost of capital of 11%, Project C has estimated internal rate of return (IRR) of 10% and a cost of capital of 12%. The company's optimal capital structure calls for 50% debt and 50% common equity. The company expects to have net income of $750,000. If the company's dividend is established using the residual model, what will be its dividend payout ratio?

44.00%

56.00%

60.00%

64.00%

70.00%

Peregrino Bay Inc. has a 3-month backlog of orders for its products. To meet this demand, management wants to expand production capacity by 40% by investing $1.75 million in plant and machinery. The firm wants to maintain its current 35% debt-to-total-assets ratio in its capital structure; it also wants to maintain its policy of paying out 30% of last year's net income as dividends to its shareholders. If last year's net income was $344,000, how much external equity must the company seek at the beginning of this year in order to expand capacity as desired? Assume the firm uses only debt and common equity in its capital structure.

$699,000

$729,000

$842,000

$896,700

$909,000