The Wei Corporation expects next years net income to be $15 million. The firms debt ratio is

Question:

The Wei expects next year’s net income to be $15 million. The firm’s debt ratio is currently 40%. Wei has $12 million of profitable investment opportunities, and it wishes to maintain its existing debt ratio. According to the residual model (assuming all payments are in the form of dividends), how large should Wei’s payout ratio be next year?

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