Residual distribution policy

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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 $6 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 = 17%; IRR = 21% Project B: Cost of capital = 11%; IRR = 16% Project C: Cost of capital = 7%; IRR = 6% Harris intends to maintain its 50% debt and 50% common equity capital structure, and its net income is expected to be $7,029,000. 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: EM131989905

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