Question
Residual dividend model Welch Company is considering three independent projects, each of which requires a $3 million investment. The estimated internal rate of return (IRR)
Residual dividend model Welch 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 is presented below:
Note that the projects' costs of capital vary because the projects have different levels of risk. The company's optimal capital structure calls for 45% debt and 55% common equity, and it expects to have net income of $6,992,500. If Welch establishes its dividends from the residual dividend model, what will be its payout ratio? Round your answer to two decimal places. _____% |
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