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Question: 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.

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Category:- Basic Finance
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