Solution-What will its payout ratio be

What will its payout ratio be

Assignment Help Finance Basics

Reference no: EM131102960

The Welch Company is considering three independent projects, each of which requires a $5 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects are as follows:

Project H (high risk): Cost of capital = 16%; IRR = 20%

Project M (medium risk): Cost of capital = 12%; IRR = 10%

Project L (low risk): Cost of capital = 8%; IRR = 9%

Note that the projects' cost of capital varies because the projects have different levels of risk. The company's optimal capital structure calls for 50% debt and 50% common equity. Welch expects to have net income of $7,287,500.

If Welch bases its dividends on the residual model (all distributions are in the form of dividends), what will its payout ratio be?

Reference no: EM131102960

Questions Cloud

Continental us varies according to the airlines : The cost of taking your pet aboard the air flight with you in the continental US varies according to the airlines. The five number summary for prices based on a sample of major US airlines was:

What would need to happen for you to reach your potential : What responsibilities or challenges could you undertake that would support your growth and development? What skills could you learn to ensure you are better equipped to do what you would like to do?

Estimate the peak deviation and the bandwidth of modulator : Estimate the peak deviation and the bandwidth of the modulator output,

Explain the concepts of planning in the project life-cycle : Explain project team building, including techniques of successful team building. Explain how to create a work breakdown structure and how a project manager breaks down the overall project into packages.

What will its payout ratio be : The Welch Company is considering three independent projects, each of which requires a $5 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects are as follows: what will its payout ratio be?

Determining the average speed : A plane leaves one of them, traveling towards the other at an average speed of 360 miles per hour. At the same time a plane leaves the other, traveling towards the first, at an average speed of 390 miles per hour. How long will it take them to mee..

Determine the peak frequency deviation in hertz : Draw the single-sided spectrum of the signal at the filter input and the filter output. Label the amplitude and frequency of each spectral component.

Stamps of two denominations : If Sabrina spent $17.94 for a total of 54 stamps of these two denominations, how many stamps of each denomination did she buy?

What was last year''s dividend per share : After a 5-for-1 stock split, the Strasburg Company paid a dividend of $0.75 per new share, which represents a 9 percent increase over last year's pre-split dividend. What was last year's dividend per share?

User Account

All Pages

What will its payout ratio be

Reference no: EM131102960

Reference no: EM131102960

Questions Cloud

Reviews

Write a Review

Finance Basics Questions & Answers

Financial reporting and analysis

A report on financial accounting

Describe the types of financial ratios

Differences between sole proprietorship and corporation

Prepare a cash budget statement

What are the implied interest rates

State pricing theory and no-arbitrage pricing theory

Small business administration

Effect of financial leverage

Evaluate the basis for the payment to the lender

Importance of opps, ipps, mpfs and dmepos

Time value of money

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT