Explanation:

The correct answer is C (64%).

According to the Gordon growth model, the dividend payout ratio (p) can be derived using the formula:

$p = \text{Forward P/E} \times (r - g)$

Where:

• $r$ = Required rate of return (12%)
• $g$ = Dividend growth rate (4%)

Substituting the given values:

$p = 8 \times (0.12 - 0.04) = 8 \times 0.08 = 0.64 = 64\%$

Why the other options are incorrect:

• A (8%): This incorrectly equates the dividend payout ratio to the dividend yield ($\frac{r - g}{1}$), resulting in 8%.
• B (33%): This miscalculates the dividend payout ratio as the dividend growth rate divided by the required rate of return ($\frac{g}{r}$), yielding approximately 33%.