Asked by Joleecia Gresham on Apr 25, 2024
Verified
A firm has a return on equity of 14% and a dividend-payout ratio of 60%. The firm's anticipated growth rate is
A) 5.6%.
B) 10%.
C) 14%.
D) 20%.
Dividend-payout Ratio
A financial ratio that shows the percentage of a company's earnings that is paid out to shareholders as dividends.
Anticipated Growth Rate
An expectation of the rate at which a company, asset, or economy will grow in a future period, often used in investment analysis.
- Ascertain the forecasted expansion rate of an enterprise through the analysis of its Return on Equity (ROE) and the fraction of profits distributed as dividends.
Verified Answer
BD
bikash dhungana7 days ago
Final Answer :
A
Explanation :
The growth rate can be calculated using the formula: Growth Rate = (1 - Dividend Payout Ratio) * Return on Equity. Here, it is (1 - 0.60) * 14% = 0.40 * 14% = 5.6%.
Learning Objectives
- Ascertain the forecasted expansion rate of an enterprise through the analysis of its Return on Equity (ROE) and the fraction of profits distributed as dividends.