If the dividend payout ratio of a company is 70%, return on investment is 15% and cost of capital is…
The growth rate is 4.5%. The retention ratio is \(1-0.70=0.30\), and the growth rate is the retention ratio multiplied by the return on investment. Thus…
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If the dividend payout ratio of a company is 70%, return on investment is 15% and cost of capital is 12%, then what should be the growth rate?
Answer and explanation
Correct answer A
The growth rate is 4.5%. The retention ratio is , and the growth rate is the retention ratio multiplied by the return on investment. Thus ; the cost of capital does not enter this calculation.
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West Bengal SET (WB SET)