In general, the higher a firm's return on equity, the _________ the dividend payout ratio and the _________ the firm's growth rate of earnings.
higher; higher
lower; higher
lower; lower
higher; lower
Answer: The correct option is "lower; higher"
Explanation:
Return on equity=(Net income)/(Shareholders' equity)
If return on equity is higher, it means the net income available to
the common shareholders will be higher which means that the
dividend payment (or the dividend payout ratio) will be lower.
Sustainable growth rate=(1-Payout ratio)*(Return on
equity)
If dividend payout ratio is lower, growth rate will be higher.
In general, the higher a firm's return on equity, the _________ the dividend payout ratio and...
The corporation's return on equity of 1 1 19% and a dividend payout ratio of 20 percent sustainable rate of growth? Oa, 11.2% Ob, 9.6% Oc. 10.9% 0 d. 9.3% what is the 9.8% e.
"Holding other factors constant, a lower dividend payout ratio raises the growth rate. But the higher growth rate does not necessarily increase the stock value." True or false? Select one: a. False b. True
Myron Gordon and John Lintner believe that the required return on equity increases as the dividend payout ratio is lowered. Their argument is that A. investors are indifferent between dividends and capital gains B. investors view dividends as being less risky than potential future capital gains C. investors require that the dividend yield plus the capital gains yield equal a constant D. investors prefer a dollar of expected capital gains to a dollar of expected dividends because of the lower tax rate on capital...
Suppose the Price/Earnings Ratio for the S&P 500 is 15 and the dividend payout ratio of the S&P 500 is 28%. The future growth rate of dividends is expected to be 3.35%. Compute the expected return of the Market. Use Goal Seek or Solver to determine the dividend growth rate that would yield an expected Market return of 7%.
Estimating Growth A firm has a constant dividend payout ratio. Last year the firm had net income of $30 million and paid out dividends of $6 million. The firm's return on equity is expected to be 13% for the foreseeable future. This stock's growth rate in dividends (g) should be
JAM Co has a dividend payout ratio of 15% (which means it has a retention ratio of 85%) If Return on Earnings is 3.5%, what is the expected growth rate for dividends?
A firm wants a sustainable growth rate of 3.08 percent while maintaining a dividend payout ratio of 26 percent and a profit margin of 5 percent. The firm has a capital intensity ratio of 2. What is the debt-equity ratio that is required to achieve the firm's desired rate of growth? ο ο 74 times ο ο ο
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)
Analysts expect MC, Co. to maintain a dividend payout ratio of 35% and enjoy an expected growth rate of 12% per year for the next 5 years. After the fifth year, all earnings will be paid out as dividends. The required rate of return on MC, Co equity is 8%. At what price would the analysts value the stock under their own expectations?
A firm plans to grow at an annual rate of at least 25%. Its return on equity is 39%. Suppose the firm has a debt-equity ratio of 1/4. What is the maximum dividend payout ratio it can maintain without resorting to any external financing? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Maximum dividend payout ratio Maximum dividend payout ratio