Which of the Following Is True for a Firm Having

question 62

Multiple Choice

Which of the following is true for a firm having a stock price of $42,an expected dividend of $3,and a sustainable growth rate of 8%?

• A) It has a required return of 15.14%.
• B) It has a dividend payout ratio of 37.5%.
• C) It has an ROE of 7.14%.
• D) It has a plowback rate of 7.14%.

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Definitions:

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set, used in financial analysis and grading.

Fixed Expenses

Recurring costs that do not fluctuate with the level of production or sales volume, such as lease payments or salaries.

Contribution Margin Percentage

A measure showing what percentage of sales revenue is available to cover fixed costs and contribute to net income, calculated as (Sales - Variable Costs) / Sales.

After-Tax Profit

The profit a company has left after paying all its taxes.