Juice & Fruit Corp has an expected ROE of 9%. The dividend growth rate will be _______ if the firm follows a policy of plowing back 10% of earnings.

Question

Quizplus · Accepted Answer

The dividend growth rate can be calculated using the formula for sustainable growth rate, which is ROE * b, where b is the retention ratio (plowback ratio). Here, ROE is 9% and the plowback ratio is 10% (0.10), so the growth rate is 9% * 0.10 = 0.9%.

Juice & Fruit Corp Has an Expected ROE of 9