What is the maximum dividend payout ratio consistent with not requiring external funds for a firm with an ROE of 15%, a debt-equity ratio of 40%, and an annual sales growth objective of 9%?

Name: What is the maximum dividend payout ratio consistent with not requiring external funds for a firm with an ROE of 15%, a debt-equity ratio of 40%, and an annual sales growth objective of 9%?
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Question

Quizplus · Accepted Answer

IG = 0.09 = (1 - Payout) × 0.15 × (1/1 + 0.40); Payout = 0.16, or 16%

What Is the Maximum Dividend Payout Ratio Consistent with Not