Asked by Chloe Myers on Jun 18, 2024
Verified
Gagliardi Way Corporation has an expected ROE of 15%. If it pays out 30% of its earnings as dividends, its dividend growth rate will be ________.
A) 4.5%
B) 10.5%
C) 15%
D) 30%
Expected ROE
The projected return on equity, which measures a company's efficiency at generating profits from every unit of shareholder's equity.
Dividend Growth Rate
The annualized percentage rate of growth that a particular stock's dividend undergoes over a period of time.
- Investigate the effect of modifications in dividend policy on the valuation of stocks and the returns of investors.
Verified Answer
PR
Patrice RICHARDSONJun 21, 2024
Final Answer :
B
Explanation :
b = 1 − 0.3 = 0.7
g = b × ROE = 0.7 × 15% = 10.5%
g = b × ROE = 0.7 × 15% = 10.5%
Learning Objectives
- Investigate the effect of modifications in dividend policy on the valuation of stocks and the returns of investors.