Marcie's Mercantile Wants to Maintain Its Current Dividend Policy,which Is

question 19

Multiple Choice

Marcie's Mercantile wants to maintain its current dividend policy,which is a payout ratio of 40%. The firm does not want to increase its equity financing but is willing to maintain its current debt-equity ratio. Given these requirements,the maximum rate at which Marcie's can grow is equal to:

• A) 40% of the internal rate of growth.
• B) 60% of the internal rate of growth.
• C) the internal rate of growth.
• D) the sustainable rate of growth.
• E) 60% of the sustainable rate of growth.

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Definitions:

Variable Costs

Costs that vary in direct proportion to changes in levels of production or sales, such as raw materials and labor expenses.

Variable Costs

Costs that change in proportion to the level of production or sales activity, such as raw materials or direct labor.

Direct Proportion

A relationship between two variables where an increase in one results in a proportional increase in the other.

Activity Level

In accounting and management, refers to the volume of units produced, hours worked, or any other measure of output that drives the costs in a business.