Last year, Lakesha's Lounge Furniture Corporation had an ROA of 5.6 percent and a dividend payout...

Question

Question

Answer 1

Answer #1

Internal growth rate= Retained earnings/Total assets

Return on Assets (ROA) = Net income/Total assets= 0.056

Therefore, Net income= Total assets*0.056

Retained earnings= Net income*(1- Pay out ratio)= Net income*(1-0.35)= Net income*0.65

Since Net income= Total assets*0.056 as above,

Retained earnings = Total assets*0.056*0.65

Therefore, internal growth rate= Total assets*0.056*0.65/ Total assets

=0.056*0.65= 0.0364 Or, 3.64%

Answer 2

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