Think Tank Company Has an Expected ROE of 26

question 46

Multiple Choice

Think Tank Company has an expected ROE of 26%.The dividend growth rate will be _______ if the firm follows a policy of plowing back 90% of earnings.

• A)2.6%
• B)10%
• C)23.4%
• D)90%
• E)none of the above

---

Definitions:

NPV

Net Present Value, a method used in capital budgeting to determine the profitability of an investment or project by calculating the present value of expected cash flows versus initial cost.

Independent Projects

Investment opportunities that do not affect the cash flows or profitability of other projects considered by an entity.

Managerial Decision

The process by which management responds to opportunities and threats by analyzing options and making determinations about specific organizational goals and courses of action.

NPV

NPV (Net Present Value) is a calculation used to assess the profitability of an investment by discounting future cash flows back to their present value.