Turtle Corp has an expected ROE of 10%. The dividend growth rate will be ________ if the firm follows a policy of paying 40% of earnings in the form of dividends.
A) 6.0%
B) 4.8%
C) 7.2%
D) 3.0%

Question

Quizplus · Accepted Answer

The dividend growth rate can be calculated using the formula: Growth Rate = ROE * (1 - Dividend Payout Ratio). Here, ROE is 10% and the payout ratio is 40%, so the growth rate is 10% * (1 - 0.4) = 6.0%.

Turtle Corp Has an Expected ROE of 10