High Speed Company has an expected ROE of 15%.The dividend growth rate will be ________ if the firm follows a policy of paying 50% of earnings in the form of dividends.
A)3.0%
B)4.8%
C)7.5%
D)6.0%
E)none of the above

Question

Quizplus · Accepted Answer

The dividend growth rate (g) can be calculated using the formula: g = ROE * (1 - payout ratio). With an ROE of 15% and a payout ratio of 50%, g = 15% * (1 - 0.5) = 7.5%.

High Speed Company Has an Expected ROE of 15