- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Valuation
- Learning Module 23. Discounted Dividend Valuation
- Subject 9. Sustainable Growth Rate
CFA Practice Question
Which of the following will increase a company's sustainable growth rate of earnings?
B. increasing its return on equity.
C. decreasing its retention rate.
A. increasing its dividend payout ratio.
B. increasing its return on equity.
C. decreasing its retention rate.
Correct Answer: B
The sustainable growth rate can be computed as the product of ROE and 1 minus the dividend payout ratio.
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