Calculate the rate at which the firm can grow without changing its leverage if its payout ratio is 70%, equity outstanding at the beginning of the year is $900,000, and its net income for the year is $150,000:
A) 5.00%
B) 11.67%
C) 14.00%
D) 16.67% ROE = 150,000/900,000 = 16.67%
Internal growth rate = 0.30 x 0.1667
Correct Answer:
Verified
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