Brevik Builders has an expected ROE of 25%.Its dividend growth rate will be __________ if it follows a policy of paying 30% of earning in the form of dividends.

Question

Quizplus · Accepted Answer

The dividend growth rate (g) can be calculated using the formula: g = ROE * (1 - payout ratio). Here, the payout ratio is 30%, so the retention ratio is 70% (1 - 0.30). Therefore, g = 25% * 70% = 17.5%.

Brevik Builders Has an Expected ROE of 25