Question
Q.No.2 (5 marks) Three independent projects, each of which requires a RS 5 million investment are being considered for investment purpose by Sona Tea Company.
Q.No.2 (5 marks)
Three independent projects, each of which requires a RS 5 million investment are being considered for investment purpose by Sona Tea Company. The cost of capital and estimated internal rate of return (IRR) for these projects are shown below:
| Project | Cost of capital | IRR |
| A | 16% | 20% |
| B | 12% | 10% |
| C | 8% | 9% |
Companys capital structure involves only debt and equity financing with the ratio of 50% each. The estimated net income from the selected projects is expected to be RS 7,287,500. What should be the dividend payout ratio If Sona tea company estimate its dividends based on the residual dividend model?
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Emerging Markets And The Global Economy A Handbook
Authors: Mohammed El Hedi Arouri, Sabri Boubaker, Duc Khuong Nguyen
1st Edition
0124115497, 978-0124115491
