A company has a book value of 125. It achieves an ROE of 20%. Its dividend payout ratio is 40%. Which of the following is correct?
a) Common shareholders "own" the full 25, but will receive 10
b) Common shareholders "own" 10 and will, therefore, receive 10
c) Common shareholders "own" the full 25, but will receive 15
d) Common shareholders "own" the full 25, and will receive 25
Answer: a) Common shareholders "own" the full 25, but will receive 10
Business
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