Asymmetric Frames Corp.had a return on equity of 15%.The corporation's earnings per share was $6.00,its dividend payout ratio was 40% and its profit-retention rate was 60%.If these relationships continue,what will be United Financial Corp.'s internal growth rate?

Question

Quizplus · Accepted Answer

The internal growth rate can be calculated using the formula:

Internal Growth Rate = Retention Rate × Return on Equity

Given that the retention rate is 60% and the return on equity is 15%, we can plug these values into the above formula to get:

Internal Growth Rate = 0.60 × 0.15 = 0.09 or 9%

Therefore, the best choice is B) 8.6% as it is the closest value to 9%.