Considering three independent projects

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Walsh Company is considering three independent projects, each of which requires a $6 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects are presented here:

Project H (high risk): Cost of capital = 17% IRR = 21%

Project M (medium risk): Cost of capital = 13% IRR = 13%

Project L (low risk): Cost of capital = 7% IRR = 11%

Note that the projects' costs of capital vary because the projects have different levels of risk. The company's optimal capital structure calls for 50% debt and 50% common equity, and it expects to have net income of $8,091,500. If Walsh establishes its dividends from the residual dividend model, what will be its payout ratio? Round your answer to two decimal places.

Reference no: EM132419845

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