A Firm Projects Net Income to Be $500,000, Intends to Pay

question 47

Multiple Choice

A firm projects net income to be $500,000, intends to pay out $125,000 in dividends, and had $2 million of equity at the beginning of the year. The firm's sustainable growth rate is:

• A)5.50%
• B)18.75%
• C)6.25%
• D)4.69%

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Definitions:

Long-run Phillips Curve

An economic concept illustrating that in the long-term, there is no trade-off between inflation and unemployment, suggesting that the natural rate of unemployment is unaffected by inflation.

Money Supply Growth Rate

The rate at which the total amount of money available in an economy increases over a specific period.

Unemployment Rate

A measure of the percentage of the labor force that is jobless and actively seeking employment.

Inflation

The tempo of growth in global prices for products and services, diluting consumer spending ability.