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 =

---

Definitions:

Special Conditions

Specific provisions or clauses added to a contract or agreement that must be met in addition to the general terms.

Article 3

A section of the U.S. Constitution that establishes the judicial branch of the federal government, outlining the powers and structure of the Supreme Court and other federal courts.

Negotiable Instruments

Financial instruments, such as checks, promissory notes, and bills of exchange, that contain an unconditional promise or order to pay a specified amount of money and are transferable by endorsement.

UCC

All commercial exchanges in the United States are regulated by the comprehensive legal framework known as the Uniform Commercial Code.