What Is the Maximum Dividend Payout Ratio Consistent with Not

question 24

Multiple Choice

What is the maximum dividend payout ratio consistent with not requiring external funds for a firm with an ROE of 15%,a debt-equity ratio of 50%,and an annual sales growth objective of 9%?

• A) Approximately 1%
• B) Approximately 10%
• C) Approximately 12%
• D) Approximately 20%

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Definitions:

Output

The aggregate production of either goods or services by an organization, commercial sector, or the economy as a whole.

Diminishing Returns Effect

A principle in economics where increasing one factor of production, while keeping others constant, will at some point yield lower per-unit returns.

Variable Cost

Expenses that vary directly with the level of production output, such as raw materials, labor, and energy costs.

Output

The total amount of goods or services produced by a company, sector, or economy within a specific time period.