Exhibit 12.2 Use the Information Below for the Following Problem(S)

question 53

Multiple Choice

Exhibit 12.2
Use the Information Below for the Following Problem(S)
Assume that the dividend payout ratio will be 75 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 12.2.What is the expected sustainable growth rate?

• A) 9.0%
• B) 7.2%
• C) 6.0%
• D) 3.0%
• E) 3.6%

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Definitions:

Alternative A

A term that refers to one of several options or choices in a decision-making process, typically labeled as "Alternative A" for distinction.

Financial Advantage

This term refers to the benefits gained in financial terms, which could include lower costs, higher revenues, or any other aspect that improves a company's financial position.

Unit Price

The cost per single item or unit, facilitating cost comparisons and financial analysis.

Outside Supplier

An external entity that provides goods or services to another organization.