The Irene Companys income statement for the current year is:

Sales $50,000

CGS (20,000)

Dep (4,000)

SGA (8,500)

Op Income $17,500

Int Exp (2,500)

NI $15,000

Growth rate, g =4%. Tax rate =0; Depreciation exp approx. replacement cost. The cost of debt is 5%, the cost of equity capital is 8%, and the rate of return on new investment is 10%.

Required:

1. Find k, the payout ratio.