If the return on equity is 5% and the firm has a dividend payout ratio of 40%,what is the sustainable growth rate?

A) $ 2 \% $
B) $ 3 \% $
C) $ 5 \% $
D) $ 7 \% $

Name: If the return on equity is 5% and the firm has a dividend payout ratio of 40%,what is the sustainable growth rate? A) $ 2 \% $ B) $ 3 \% $ C) $ 5 \% $ D) $ 7 \% $
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Question

If the return on equity is 5% and the firm has a dividend payout ratio of 40%,what is the sustainable growth rate?

A) $ 2 \% $
B) $ 3 \% $
C) $ 5 \% $
D) $ 7 \% $

Quizplus · Accepted Answer

Using the sustainable growth rate equation in 14.5.6.2,we can find the sustainable growth rate as follows: (1 - 0.4)F1F1F1S1F1F1F10 0.05 = 0.03.

If the Return on Equity Is 5% and the Firm 2% 2 \% 2%

If the Return on Equity Is 5% and the Firm $2 \%$