Walsh Company is considering three independent projects, each of which requires a $4 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 = 16%	IRR = 19%
Project M (medium risk):	Cost of Capital = 12%	IRR = 13%
Project L (low risk):	Cost of Capital = 9%	IRR = 8%

Note that the project’s costs of capital vary because the projects have different levels of risk. The company’s optimal capital structure calls for 40% debt and 60% common equity, and it expects to have net income of $7,500,000. If Walsh establishes its dividends from the residual dividend model, what will be its payout ratio?

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