Question

The most recent financial statements for Live Co. are shown here:

Answer 1

Answer:

The answer is "Option A".

Explanation:

Using formula:

$\text{Equity Return} = \frac{ \text{Net Income}}{ \text{Total Assets}} \times 100$

                       $= \frac{1,077}{17,593} \times 100 \\\\= 0.0612175297 \times 100\\\\= 6.12175297\\\\=6.12 \%$  

$\text{Calculating the Plowback Ratio} \ (b) = 1- \text{Dividend Payout Ratio}$

                                                       $= 1-0.30 \\\\ = 0.70$

$\text{Internal Growth Rate} = \frac{ROA \times b }{(1-ROA \times b)}$

                                  $= \frac{0.0612 \times 0.70}{(1-0.0612\times 0.70)} \\\\= \frac{0.04284}{0.95716} \\\\ =0.044754073 \\\\ =4.47\%$