Bubba Gumm Company has an expected ROE of 9%.The dividend growth rate will be _______ if the firm follows a policy of plowing back 10% of earnings.

Name: Bubba Gumm Company has an expected ROE of 9%.The dividend growth rate will be _______ if the firm follows a policy of plowing back 10% of earnings.
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Question

Quizplus · Accepted Answer

The dividend growth rate can be calculated using the formula: g = (1 - payout ratio) x ROE. Plugging in the values, we get g = (1 - 0.10) x 0.09 = 0.9%. Therefore, the correct answer is option D) 0.9%.

Bubba Gumm Company Has an Expected ROE of 9