If a Firm Pays Out 30% of Its Earnings as Dividends

question 66

Multiple Choice

If a firm pays out 30% of its earnings as dividends and has averaged a 20 percent return on equity,how quickly can the firm grow while maintaining a constant debt to equity mix?

• A)6.4%.
• B)10.2%.
• C)14.3%.
• D)20.0%.
• E)none of the above.

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Definitions:

Inventory

The total amount of goods and materials held by a business for the purpose of resale or production, including raw materials, work-in-progress, and finished goods.

Manufactured Units

Manufactured units refer to the total number of units produced by a company during a specific period through its manufacturing process.

April

The fourth month of the year in the Gregorian calendar.

Sales Estimates

Sales estimates are projections of the amount of revenue that will be generated through sales activities in a future period.