Sustainable Growth Rate and Dividend Growth Rate Quiz
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Questions and Answers

What is the formula for the internal growth rate (Sustainable Growth Rate)?

  • g = ROE + Dividend Payout Ratio
  • g = ROE / Dividend Payout Ratio
  • g = ROE x (1 – Dividend Payout Ratio) (correct)
  • g = ROE - Dividend Payout Ratio

    • What does ROE stand for in the context of the internal growth rate formula?

  • Retained Operating Earnings
  • Rate of Earnings
  • Revenue over Expenses
  • Return on Equity (correct)

    • How is the dividend growth rate related to the internal growth rate?

  • The dividend growth rate is subtracted from the ROE to calculate the internal growth rate (correct)
  • The dividend growth rate is multiplied by the ROE to calculate the internal growth rate
  • The dividend growth rate is added to the ROE to calculate the internal growth rate
  • The dividend growth rate is not related to the internal growth rate

    • What is the formula for calculating the dividend growth rate using the Arithmetic Mean Model?

    <p>$Gi = (\frac{Dividend_{Di} - Dividend_{Di-1}}{Dividend_{Di-1}}) \times 100$</p> Signup and view all the answers

    How is the dividend growth rate calculated using the Dividend Growth Rate formula?

    <p>$Dividend Growth Rate = (\frac{G1+G2+ ……. +Gn}{n})$</p> Signup and view all the answers

    What does the formula $Dividend Growth Rate = (\frac{Dividend_{Dn}}{Dividend_{D0}})^{\frac{1}{n}} - 1$ represent?

    <p>The compound annual growth rate (CAGR) of dividends</p> Signup and view all the answers

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