Internal growth rate: Meredith Ltd has a return on equity of 21.5 per cent, an equity ratio of 55 per cent, and a dividend payout ratio of 70 per cent. What is the company's internal growth rate?

Question

Quizplus · Accepted Answer

The internal growth rate is calculated using the formula: ROE * (1 - Dividend Payout Ratio) * Equity Ratio. Substituting the given values: 21.5% * (1 - 0.70) * 0.55 = 3.6%.

Internal Growth Rate: Meredith Ltd Has a Return on Equity