Think Tank Company Has an Expected ROE of 26

question 2

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%

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Definitions:

Preincorporation Subscriptions

Agreements made by individuals or entities to purchase stock in a corporation that has not yet been formed.

Board of Directors

is a group of individuals elected by shareholders to oversee and make decisions on behalf of a corporation.

Promoters

Individuals or companies that initiate the creation of a business or corporation, often handling the legal and logistic tasks of organization.

Preincorporation Share Subscription

An agreement by an investor to purchase shares in a corporation that is yet to be formed, often used to fund the creation of the new company.