For a stock pricing model,an analyst selects 10% as the sustainable growth rate in dividends for a firm.Given that the firm pays out 40% of net income as dividends each year,what is the return on shareholder equity for this firm?

Name: For a stock pricing model,an analyst selects 10% as the sustainable growth rate in dividends for a firm.Given that the firm pays out 40% of net income as dividends each year,what is the return on shareholder equity for this firm?
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Question

Quizplus · Accepted Answer

g = .10
rr = .60
g = rr*ROE
ROE = .1/.6

For a Stock Pricing Model,an Analyst Selects 10% as the Sustainable