Exhibit 12.1 Use the Information Below for the Following Problem(S)

question 56

Multiple Choice

Exhibit 12.1
Use the Information Below for the Following Problem(S)
Assume that the dividend payout ratio will be 65 percent when the rate on long-term government bonds falls to 8 percent. Since investors are becoming more risk averse, the equity risk premium will rise to 7 percent and investors will require a 15 percent return. The return on equity will be 12 percent.
-Refer to Exhibit 12.1.What is the expected sustainable growth rate?

• A) 2.80%
• B) 4.20%
• C) 5.25%
• D) 7.80%
• E) 9.75%

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Definitions:

Older Adults

A demographic group typically defined as individuals aged 65 years and older.

Retirement

The period in life when one permanently leaves the workforce after years of employment, often marked by a transition to activities focused on personal interests and leisure.

Working Full Time

Employment status where individuals engage in work for a significant majority of the typical weekly working hours, often defined as 35-40 hours or more.

Older Adults

Individuals who have reached an advanced stage of life, often characterized by retirement, increased free time, and sometimes, reduced physical capabilities.