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:

Stock Split

Issue by a corporation of a given number of shares in exchange for shares currently held by stockholders. A split increases the number of shares outstanding. A reverse split decreases the number outstanding.

Divisor

A number by which another number is to be divided.

Dow Jones Industrial Average

A stock market index that measures the stock performance of 30 large, publicly-owned companies trading on stock exchanges in the United States.

Stocks Traded

Refers to the buying and selling of stock shares on financial markets.