Toronto Skaters Co

question 45

Multiple Choice

Toronto Skaters Co.has a return on equity of 8 percent and pays out 20 percent of its earnings in dividends.The expected growth in dividends is:

• A) 1.6%
• B) 6.4%
• C) 8%
• D) 20%

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Definitions:

Market Rate

The prevailing interest rate available in the financial markets for a similar instrument or the going rate for goods or services in a certain market.

Issuance Price

Refers to the price at which a company's securities, such as stocks or bonds, are sold to investors when they are first made available.

Straight-line Method

A method of calculating depreciation of an asset by evenly spreading its cost over the expected useful life.

Semiannual Interest

Interest payments made twice a year on loans, bonds, or deposits.