A firm has a dividend payout ratio of 20%,annual profit of $20 000 and a market value of equity equal to $150 000.Given a corporate tax rate of 30%,estimate the growth rate in dividends.

Question

Quizplus · Accepted Answer

To obtain the growth rate,we need the following inputs: growth rate: plowback ratio F1F1F1S1F1F1F10 ROE;plowback ratio: 1 - payout ratio;ROE: profits/equity;growth rate: plowback ratio F1F1F1S1F1F1F10 ROE.ROE = 20 000/150 000 = 0.133333,growth rate = (1 - 0.2)F1F1F1S1F1F1F10 0.1333 = 0.1067 or 10.67%.

A Firm Has a Dividend Payout Ratio of 20%,annual Profit 8.89% 8.89 \% 8.89%

A Firm Has a Dividend Payout Ratio of 20%,annual Profit $8.89 \%$