Calculate the plowback ratio given the following information: $$\begin{array}{l}
\begin{array} { | l | c | r | }
\hline\text { Data: }\
\hline \text { Internal Growth Rate } & = & 3.20 \% \
\hline \text { ROE } & = & 16.00 \% \
\hline \text { Equity/Assets } & = & 60.00 \% \
\hline
\end{array}
\end{array}$$

Question

Calculate the plowback ratio given the following information: $$\begin{array}{l}
\begin{array} { | l | c | r | } 
\hline\text { Data: }\
\hline \text { Internal Growth Rate } & = & 3.20 \% \
\hline \text { ROE } & = & 16.00 \% \
\hline \text { Equity/Assets } & = & 60.00 \% \
\hline
\end{array}
\end{array}$$

Quizplus · Accepted Answer

The plowback ratio (b) can be calculated using the formula for the internal growth rate: Internal Growth Rate = ROE * b. Rearranging gives b = Internal Growth Rate / ROE = 3.20% / 16.00% = 0.20. However, the internal growth rate formula also considers the retention ratio, which is 1 - dividend payout ratio. Given the choices, the closest match for the retention ratio is 0.667.

Calculate the Plowback Ratio Given the Following Information A)333 B)

Calculate the Plowback Ratio Given the Following Information A)333
B)