For a firm with a constant payout ratio,the dividend growth rate can be estimated as:
A)Payout ratio × Return on equity.
B)Return on assets × Retention ratio.
C)Return on equity × (1 + Retention ratio).
D)Payout ratio × Return on assets.
E)Return on retained earnings × Retention ratio.

Question

Quizplus · Accepted Answer

The dividend growth rate for a firm with a constant payout ratio can be estimated using the formula: Return on retained earnings × Retention ratio. This reflects the growth potential from reinvested earnings.

For a Firm with a Constant Payout Ratio,the Dividend Growth