Asymmetric Frames Corp. had a return on equity of 15%. The corporation's earnings per share was $6.00, its dividend payout ra

Question

3 years ago

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Asymmetric Frames Corp. had a return on equity of 15%. The corporation's earnings per share was $6.00, its dividend payout ra

tio was 40% and its profitminusretention rate was 60%. If these relationships continue, what will be United Financial Corp.'s internal growth rate?A.8.6%B.6.0%C.15.6%D.9.0%

Business

1 answer:

svet-max [94.6K] · Answer 1 · 2022-07-28T03:23:18+03:00

Answer:

D. 9.0%

Explanation:

Provided return on equity = 15% = K $_e$

Earnings per share = $6.00

Dividend = 40% = $6 $\times$ 0.4 = $2.40

Internal Growth Rate = Cost of equity $\times$ (1 - Dividend payout ratio)

Putting values in above we have

Internal growth rate = 15% $\times$ (1 - 40%)

= 15% $\times$ 60%

= 9%

Therefore, correct option is

D. 9.0%

Asymmetric Frames Corp. had a return on equity of​ 15%. The​ corporation's earnings per share was​ $6.00, its dividend payout ra

Asymmetric Frames Corp. had a return on equity of 15%. The corporation's earnings per share was $6.00, its dividend payout ra