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MC Frasier Cabinets wants to maintain a growth ...

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 .0.55, a total asset turnover ratio of 1.30, and a profit margin of 9.0 percent. What must the dividend payout ratio be? HINT: Determine if the target growth rate is IGR/SGR. Next, use the formula to determine how much money (%) the firm can afford to payout to stockholders. You will also want to review the DuPont identity.

A. 26.26 percent
B. 38.87 percent
C. 49.29 percent
D. 61.13 percent
E. 73.74 percent

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