National Co. is considering the following independent, average-risk investment projects: Project Project V Project W Project X Project Y Project Z Size of Project P1.0 million 1.2 million 1.2 million 1.2 million 1.0 million Project IRR 12.0% 11.5 11.0 10.5 10.0
National Co. is considering the following independent, average-risk investment projects: Project Project V Project W Project X Project Y Project Z Size of Project P1.0 million 1.2 million 1.2 million 1.2 million 1.0 million Project IRR 12.0% 11.5 11.0 10.5 10.0
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
Problem 1PS
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If the company follows a residual dividend policy, what will be its payout ratio?

Transcribed Image Text:National Co. is considering the following independent, average-risk investment
projects:
Project
Project V
Project W
Project X
Project Y
Project Z
Size of Project
P1.0 million
1.2 million
1.2 million
1.2 million
1.0 million
Project IRR
12.0%
11.5
11.0
10.5
10.0
The company has a target capital structure that consists of 50 percent debt and 50
percent equity. Its after-tax cost of debt is 8 percent, its cost of equity is estimated to
be 13.5 percent, and its net income is P5 million.
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