Question #125
Reading: Reading 20 Discounted Dividend Valuation
PDF File: Reading 20 Discounted Dividend Valuation.pdf
Page: 49
Status: Unattempted
Question
GreenGrow, Inc., has current dividends of $2.00, current earnings of $4.00 and a return on equity of 16%. What is GreenGrow's sustainable growth rate?
Answer Choices:
A. 6%
B. 9%
C. 8%
Explanation
GreenGrow's sustainable growth rate is 8%.
g = [1 – ($2/$4)](0.16) = 8%