Question #59
Reading: Reading 20 Discounted Dividend Valuation
PDF File: Reading 20 Discounted Dividend Valuation.pdf
Page: 23
Status: Correct
Correct Answer: A
Question
If Cantel, Inc., has current earnings of $17, dividends of $3.50, and a sustainable growth rate of 11%, what is its return on equity (ROE)?
Answer Choices:
A. 13.85%
B. 17.64%
C. 11.91%
Explanation
Cantel's ROE is 13.85%:
ROE = 11% / [1 – ($3.50/$17.00)] = 13.85%