Question
Suppose a firm has been earning a return on equity (ROE) of 11 percent and retaining 80 percent of its earnings (i.e. its dividend payout
Suppose a firm has been earning a return on equity (ROE) of 11 percent and retaining 80 percent of its earnings (i.e. its dividend payout ratio is 20 percent). If this situation is expected to continue indefinitely, what would be a reasonable estimate of g, the companys future growth rate in dividends?
| a. | 12.7% | |
| b. | 11.0% | |
| c. | 8.8% | |
| d. | 6.6% | |
| e. | 2.2% |
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Fundamentals of Investing
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
12th edition
978-0133075403, 133075354, 9780133423938, 133075400, 013342393X, 978-0133075359
