ABC CorpHas an ROE of 20 Percent and a Current Dividend-Payout

question 53

Multiple Choice

ABC Corp.has an ROE of 20 percent and a current dividend-payout ratio of 40 percent.Which of the following changes will allow their earnings to grow at a 15 percent rate?

• A)A decrease in the dividend-payout ratio to 35 percent while holding ROE constant
• B)A two-percentage-point decrease in ROE while holding dividend-payout ratio constant
• C)A decrease in dividend-payout ratio to 25 percent while holding ROE constant
• D)An increase in dividend payout ratio to 50 percent and an increase in ROE to 25 percent current earnings growth rate = plowback ratio x ROE
• = )6 x .20 = 12%
• Desired earnings growth rate = plowback ratio x ROE

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Definitions:

Order of Eviction

A legal document issued by a court that directs a tenant to vacate a property within a specified timeframe due to violations such as non-payment of rent or breach of lease terms.

Breach of Contract

The violation of any of the agreed-upon terms and conditions of a binding contract, which may give rise to legal consequences for the party in breach.

Forcibly Evict

The act of removing a tenant from rental property by force or through legal proceedings because of violations of the lease or law.

Unjustifiably Vacates

Refers to the act of leaving or abandoning a position or place without valid reason or justification.