Residual distribution policy

Assignment Help Financial Management
Reference no: EM131500906

Residual Distribution Policy Harris Company must set its investment and dividend policies for the coming year. It has three independent projects from which to choose, each of which requires a $4 million investment. These projects have different levels of risk, and therefore different costs of capital. Their projected IRRs and costs of capital are as follows:

Project A: Cost of capital = 18%; IRR = 21%

Project B: Cost of capital = 11%; IRR = 14%

Project C: Cost of capital = 7%;  IRR = 11%

Harris intends to maintain its 55% debt and 45% common equity capital structure, and its net income is expected to be $9,607,000. If Harris maintains its residual dividend policy (with all distributions in the form of dividends), what will its payout ratio be? Round your answer to two decimal places.

    %

Reference no: EM131500906

Questions Cloud

Determine the depreciation schedule for an asset : Determine the depreciation schedule for an asset that costs $100,000 under the following conditions:
What is the real risk-free rate of return : Default risk premium = 2.45% On the basis of these data, what is the real risk-free rate of return?
What is the intrinsic value of equity : What is the value of operations? what is the intrinsic value of equity? How many shares will remain after the repurchase?
Determine the NPV and EAC for the two alternatives : Determine the NPV and EAC for the two alternatives.
Residual distribution policy : Residual Distribution Policy Harris Company must set its investment and dividend policies for the coming year. If Harris maintains its residual dividend policy
About the dividend payout : The Wei Corporation expects next year's net income to be $10 million. how large should Wei's dividend payout ratio be next year?
What will be its dividend payout ratio : Residual Distribution Model Puckett Products is planning for $3 million in capital expenditures next year. what will be its dividend payout ratio?
Amount will the insurance company pay for the damages : What amount will the insurance company pay for the damages? What amount will Kurt have to pay?
Forward rate according to IRP : What should be the one year forward rate according to IRP?

Reviews

Write a Review

Financial Management Questions & Answers

  Use pure expectations hypothesis

The following table shows the price of $1000 face value 1-year, 2-year, 3-year, 9-year and 10-year US Treasury zero coupon bonds as of Oct. 17, 2016. Use pure expectations hypothesis to determine: Based on you calculations in part (A), what is the bo..

  Decentralized and distributed IT architectures

What are functional silos and how do they evolve in organizations? Compare and contrast centralized, decentralized and distributed IT architectures. Which do you think is most appropriate for ERP and why? List the horizontal and vertical levels of sy..

  What is the bonds yield to call

The bond has a 7.10% yield to maturity, but it can be called in 6 years at a price of $1, 045. What is the bond's yield to call?

  Investment in net operating working capital

Talbot Industries is considerinng launching a new product. The new manufaturing equipment will cost $17 millioon., and production and sales will rquire an initial $5 million investment in net operating working capital. What is the initial investment ..

  What is the present value of fords interest tax shield

Ford expects to earn a free cash flow of $100, starting in 1 year, forever. The discount rate on the assets of the firm is 18%. Further, Ford has issued debt of $1,000 at an interest rate and yield-to-maturity of 5%. Ford will perpetually roll this $..

  Deposit each quarter to achieve your goal

Suppose that you have $40,000 in an account that earns eight percent, compounded monthly. You want this $40,000 to grow to $160,000 in fifteen years. However, you plan on making sixty equal quarterly deposits into the account, beginning one quarter f..

  Summary on leadership in organizations

Ensure that you identify any claims and validation of the claim or bias present. For example, answer whether the author has an agenda, such as if the article limits the view of the topic and is not portraying another side of the story.

  Which machine should be purchased and why

You require a new machine for 20 years. Machine A lasts 5 years and Machine B lasts 4 years. Machine A costs $13,000 and Machine B costs $11,000. The salvage value of Machine A is $3,000 and the salvage value of Machine B is $4,000. Annual O&M costs ..

  Rate for general administration and financial services

St. Benedict’s Hospital has three support departments and four patient services departments. Assume that the hospital uses the direct method for cost allocation. Furthermore, the cost driver for General Administration and Financial Services is patien..

  EBIT indifference level associated with two financing plan

Abe Forrester and three of his friends from college have interested a group of venture capitalists in backing their business idea. The proposed operation would consist of a series of retail outlets to distribute and service a full line of vacuum clea..

  How much interest will you save if you refinance your loan

FreddieMac reports that the average rate on a 30-year fixed rate mortgage is 3.92% as of January 2012. This is down from 4.76% in January 2011 and 5.03% in January 2010. If you have a $226,000, 5%, 30-year mortgage, how much interest will you save if..

  Book the depreciation of the building for march

Book the transaction of the purchase of the building on March 01, 2005 - Book the depreciation of the building for March 2005

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd