What is the return on equity for a firm that has a constant dividend growth rate of 7% and a dividend payout ratio of 60%?
A) 2.80%
B) 4.20%
C) 11.67%
D) 17.50%

Name: What is the return on equity for a firm that has a constant dividend growth rate of 7% and a dividend payout ratio of 60%? A) 2.80% B) 4.20% C) 11.67% D) 17.50%
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Quizplus · Accepted Answer

The return on equity (ROE) can be calculated using the formula: ROE = Dividend Growth Rate / (1 - Dividend Payout Ratio). Here, ROE = 7% / (1 - 0.60) = 7% / 0.40 = 17.50%.

What Is the Return on Equity for a Firm That