Which of the Following Is True for a Firm Having

question 86

Multiple Choice

Which of the following is true for a firm having a stock price of $42, and expected dividend of $3, and a sustainable growth rate of 8 percent?

• A)it has a required return of 15.14 percent.
• B)it has a dividend payout ratio of 37.5 percent.
• C)it has a ROE of 7.14 percent.
• D)it has a plowback rate of 7.14 percent.

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Definitions:

Equity Method

An accounting technique used when an investing company holds significant influence over the investee but does not have full control over it, involving the recognition of income on the investment based on the investee’s net income.

Unrealized Profits

Profits that have been earned but not yet realized through a transaction, such as an increase in value of an asset that has not been sold.

Intercompany Sales

Transactions involving the exchange of goods or services between subsidiaries within the same parent company.

Mark-Up

The amount added to the cost price of goods to cover overhead and profit, resulting in the selling price.