Corporation has a dividend payout ratio of 25 percent and a sustainable growth rate of 12...

Question

Question

Corporation has a dividend payout ratio of 25 percent and a sustainable growth rate of 12 percent. What is the company’s return on equity (ROE)

Answer 1

Answer #1

Answer:

Sustainable growth rate = ROE x (1 - Dividend payout ratio)

12% = ROE x ( 1 - 0.25)

12% = ROE x 0.75

ROE = 16%

Company's ROE is equal to 16%.

Answer 2

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