Toria Corp has an expected ROE of 15%. The dividend growth rate will be _______ if the firm follows a policy of plowing back 75% of earnings.
A) 3.75%
B) 11.25%
C) 8.25%
D) 15.0%

Question

Quizplus · Accepted Answer

The dividend growth rate can be calculated using the formula for sustainable growth rate, which is ROE * (1 - dividend payout ratio). Given an ROE of 15% and a plowback ratio (1 - dividend payout ratio) of 75%, the dividend growth rate is 15% * 0.75 = 11.25%.

Toria Corp Has an Expected ROE of 15