What Is the Maximum Dividend Payout Ratio Consistent with Not

question 24

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%

---

Definitions:

Demand Elasticity

The degree to which the demand for a product changes in response to a change in its price.

Isoelastic Curve

An isoelastic curve represents a locus where the elasticity of a variable, such as demand or utility, is constant.

Market Demand

The total demand for a product or service within a given market, representing the aggregate of individual demands.

Aggregation Examples

Instances of combining multiple items, data, or variables into a single set or summary.