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 below: Project H (High risk): Cost of capital = 16% IRR = 21% Project M (Medium risk): Cost of capital = 13% IRR = 11% Project L (Low risk): Cost of capital = 8% IRR = 10% Note that the projects' costs of capital vary because the projects have different levels of risk. The company's optimal capital structure calls for 25% debt and 75% common equity, and it expects to have net income of $5,895,000. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. x Open spreadsheet If Walsh establishes its dividends from the residual dividend model, what will be its payout ratio? Round your answer to two decimal places. DE F G H Residual dividend model 4 Each project's investment cost Cost of capital, - Cost of capital IRRM-IRR $3,000,000 3.00% 1.00% 7 in Project H (High Risk) M (Medium Risk) L (Low Risk) Cost of Capital 16.00% 13.00% 8.00% Internal Rate of Return 21.00% 11.00% 10.00% mm O-NM Firm's Capital Structure Weights: % debt in capital structure, W. % common equity in capital structure, w 25.00% 75.00% 6 Net income $5,895,000 8 Calculation of Capital Budget: Include in Budget (Y/N) Investment Cost Formulas 0 ON Mimigh Risk Project H (High Risk) M (Medium Risk) L (Low Risk) Total Capital Budget #N/A #N/A #N/A #N/A #N/A #N/A #N/A Calculation of Capital Budget Financed -5 with Common Equity: 6 Common equity required Formulas #N/A Calculation of Common Dividends 8 Using Residual Model: Common dividends #N/A -1 Calculation of Dividend Payout Ratio: -2 Dividend payout ratio #N/A