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Brevik Builders has an expected ROE of 25%. Its dividend growth rate will be __________ if it follows a policy of paying 30% of earnings in the form of dividends. A. 5% B. 15% C. 17.5% D. 45%

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Parrain

Answer: C. 17.5%

Explanation:

The Return on Equity can be calculated by the formula;

ROE = Growth rate / (1 - dividend payout ratio)

25% = Growth rate / ( 1 - 30%)

Growth rate = 25% * 70%

Growth rate = 17.5%

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