What Is the Maximum Dividend Payout Ratio Consistent with Not

question 12

Multiple Choice

What is the maximum dividend payout ratio consistent with not requiring external funds for a firm with an ROE of 15%, a debt-equity ratio of 50%, and an annual sales growth objective of 9%?

• A)Approximately 1%
• B)Approximately 10%
• C)Approximately 12%
• D)Approximately 20% If debt-equity ratio = .5, then 1/3 of the firm is debt financed and 2/3 of the firm is equity financed.
• And 2/3 = 66.67%
• Internal growth rate =

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