What Is the Return on Equity for a Firm That

question 38

Multiple Choice

What is the return on equity for a firm that has a constant dividend growth rate of 7% and a dividend payout ratio of 60%?

• A) 2.80%
• B) 4.20%
• C) 11.67%
• D) 17.50%

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Definitions:

Elastic

Describes a situation where the demand or supply for a good or service significantly changes in response to changes in price.

Pure Competition

A market structure characterized by a large number of buyers and sellers, uniform products, and free entry and exit, leading to price taking behaviour.

Excess Capacity

A situation where a firm is producing at a level less than its potential maximum output, indicating underutilization of resources.

Monopolistically Competitive

An economic scenario where multiple companies offer products that are alike but not exactly the same, providing them with a certain level of influence over the market.