Determine what will be the payout ratio of project

Assignment Help Financial Econometrics

Reference no: EM13336239

Welch Company is considering three independent projects, each of which requires a $4 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects is presented below:

Project H (High risk):	Cost of capital = 16%	IRR = 22%
Project M (Medium risk):	Cost of capital = 14%	IRR = 12%
Project L (Low risk):	Cost of capital = 8%	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 55% debt and 45% common equity, and it expects to have net income of $9,802,000. If Welch establishes its dividends from the residual dividend model, what will be its payout ratio?

Reference no: EM13336239

Questions Cloud

Explain what will be the initial rate : the initial rate is 0.03 mol L-1 s-1 when the initial concentrations are: [?NH?_4^+ ]_0 = 0.015 mol L-1 and [?NO?_2^- ]_0 = 0.02 mol L-1. What will be the initial rate (in mol L-1 s-1) when the initial concentrations are- [?NH?_4^+ ]_0 = 0.03 mol ..

Find the speed of the knife after passing through the target : A knife thrower throws a knife toward a 300-g target that is sliding in her direction at a speed of 2.50 m/s on a horizontal frictionless surface. find the speed of the knife after passing through the target

Compute the current value per share of lily co stock : The company's dividends are expected to grow at a constant rate of -0.8% indefinitely. The risk-free rate of return is 2% and the expected return on the market portfolio is 6%. If the stock of Lily Co. has a beta of 1.4

Does it travel at the same speed the entire time : Does it travel at the same speed the entire time?

Determine what will be the payout ratio of project : Welch Company is considering three independent projects, each of which requires a $4 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects

Develop a domain model for the case study : The objective of the assignment is to apply and consolidate skills acquired in the requirement and analysis disciplines through analysis of a simple case study, and to express the results through the relevant UML diagrams.

Explain an ideal solution of cyclohexane and toluene : The mole fraction of toluene in an ideal solution of cyclohexane and toluene that has a vapor pressure equals to 53.2 mmHg at 25oC is: A) 0.25 B) 0.28 C) 0.31 D) 0.35

Hold the baseball and sheet of paper side by side : 1.) Hold the baseball and sheet of paper side by side. Predict which one will travel with the faster motion when released. Then drop them both at the same time. Did your prediction match the results?

How much external equity must northern pacific seek : Northern Pacific Heating and Cooling Inc. has a 6-month backlog of orders for its patented solar heating system. To meet this demand, management plans to expand production capacity by 15%

User Account

All Pages