Last year Rain Repel Corporation had an ROA of 5 percent and a dividend payout ratio of 90 percent. What is the internal growth rate?
A) 4.75 percent
B) 0.50 percent
C) 50.00 percent
D) 52.63 percent

Question

Quizplus · Accepted Answer

The internal growth rate can be calculated using the formula: Internal Growth Rate = ROA * (1 - dividend payout ratio). Given ROA = 5% or 0.05, and dividend payout ratio = 90% or 0.9, the calculation is 0.05 * (1 - 0.9) = 0.05 * 0.1 = 0.005 or 0.5%.

Last Year Rain Repel Corporation Had an ROA of 5