Shark Tank Corp has an expected ROE of 26%. The dividend growth rate will be _______ if the firm follows a policy of plowing back 90% of earnings.

Question

Quizplus · Accepted Answer

The dividend growth rate can be calculated using the formula for sustainable growth rate (SGR), which is ROE * (1 - dividend payout ratio). Given an ROE of 26% and a plowback ratio (1 - dividend payout ratio) of 90%, the growth rate is 26% * 90% = 23.4%.

Shark Tank Corp Has an Expected ROE of 26