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

question 97

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)16.3%.
• D)20.0%.
• E)none of the above.

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Definitions:

Concurrent Powers

Powers that are shared by both the federal and state governments in the United States.

Supremacy Clause

A clause in the U.S. Constitution declaring that federal law takes precedence over state law when the two are in conflict.

Preempts

Refers to the legal principle that federal law takes precedence over state laws in areas where the federal government has been granted authority.

Equal Protection

A constitutional principle in the United States that requires states to govern impartially, not discriminating between individuals or groups particularly in rights and responsibilities.