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In: Finance
Walsh Company is considering three independent projects, each of which requires a $6 million investment. The...
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 below:
| Project H (High risk): | Cost of capital = 16% | IRR = 21% |
| Project M (Medium risk): | Cost of capital = 14% | IRR = 11% |
| Project L (Low risk): | Cost of capital = 7% | 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 45% debt and 55% common equity, and it expects to have net income of $8,872,000. 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.
If Walsh establishes its dividends from the residual dividend model, what will be its payout ratio? Round your answer to two decimal places.
%
Solutions
jeff jeffy answered 8 months agoRelated Solutions
Lane Industries is considering three independent projects, each of which requires a $2.5 million investment. The...
Lane Industries is considering three independent projects, each
of which requires a $2.5 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 = 15%
IRR = 17%
Project M (medium risk):
Cost of capital = 10%
IRR = 8%
Project L (low risk):
Cost of capital = 7%
IRR = 8%
Note that the projects' costs of capital vary because the
projects have...
Lane Industries is considering three independent projects, each of which requires a $2.5 million investment. The...
Lane Industries is considering three independent projects, each
of which requires a $2.5 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 = 13%
IRR = 15%
Project M (medium risk):
Cost of capital = 10%
IRR = 8%
Project L (low risk):
Cost of capital = 8%
IRR = 9%
Note that the projects' costs of capital vary because the
projects have...
Lane Industries is considering three independent projects, each of which requires a $2.5 million investment. The...
Lane Industries is considering three independent projects, each
of which requires a $2.5 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 = 13%
IRR = 15%
Project M (medium risk):
Cost of capital = 10%
IRR = 8%
Project L (low risk):
Cost of capital = 8%
IRR = 9%
Note that the projects' costs of capital vary because the
projects have...
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-$25
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Round your answers to two decimal places....
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Payback, NPV, and MIRR
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Year
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20
2
10
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3
15
8
4
20
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Round your answers to two decimal places....
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Year
Project A
Project B
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2
10
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3
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