Excel Online Structured Activity: Residual dividend model 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 = 17% Project M (Medium risk): Project L (Low risk): Cost of capital = 15% Cost of capital = 7% % IRR = 20% IRR = 11% IRR = 9% 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 $7,931,000. 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. 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.
Excel Online Structured Activity: Residual dividend model 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 = 17% Project M (Medium risk): Project L (Low risk): Cost of capital = 15% Cost of capital = 7% % IRR = 20% IRR = 11% IRR = 9% 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 $7,931,000. 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. 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.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Excel Online Structured Activity: Residual dividend model
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):
Project M (Medium risk):
Project L (Low risk):
Cost of capital = 17%
Cost of capital = 15%
%
Cost of capital = 7%
IRR = 20%
IRR = 11%
IRR = 9%
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
$7,931,000. 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.
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.
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