Net CorpHas an ROE of 30% and Would Like to See

question 54

Multiple Choice

Net Corp.has an ROE of 30% and would like to see earnings grow at a 18% annual rate.What percent of earnings can they afford to pay out as dividends?

• A)45%
• B)40%
• C)35%
• D)30% Growth in earnings = Plowback x ROE
• )18 = Plowback x .30
• )18/.30 = 60% = Plowback

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