Frasier Cabinets wants to maintain a growth rate of 5 percent without incurring

Question

Frasier Cabinets wants to maintain a growth rate of 5 percent without incurring any additional equity financing. The firm maintains a constant debt-equity ratio of .55, a total asset turnover ratio of 1.30, and a profit margin of 9 percent. What must the dividend payout ratio be?

A. 26.26 percent

B. 38.87 percent

C. 49.29 percent

D. 61.13 percent

E. 73.74 percent

Frasier Cabinets wants to maintain a growth rate of 5 percent without incurring any additional equity financing. The firm maintains a constant debt-equity ratio of .55, a total asset turnover ratio of 1.30, and a profit margin of 9 percent. What must the dividend payout ratio be?

A. 26.26 percent

B. 38.87 percent

C. 49.29 percent

D. 61.13 percent

E. 73.74 percent

Explanation / Answer

E. 73.74 percent

Working:

Approx to 73.74

g 5% Profit 9% Debt equity ratio 0.55 Total Asset turnover ratio 1.30 Dividend Payout ratio ?

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