The market value and book value of Visual Image Inc.'s outstanding 2 million common shares are $60 million and $30 million,respectively.The company's recent net profit was $3,500,000.What is the company's sustainable dividend growth rate if it uses a dividend payout ratio of 60 percent?

Question

Quizplus · Accepted Answer

Compute retention ratio = 1 - 60% = 40%,ROE = $3,500,000/$30,000,000 = 11.67% and then g = 40%*11.67% = 4.67%

The Market Value and Book Value of Visual Image Inc