Homework Answers
Calculation of internal growth rate:
Internal growth rate= Return on equity*Retention ratio
Return on equity= net income/shareholders equity*100
Return on equity= 1.7/7.4*100= 22.94%
Retention ratio= (1.7-1.2)/1.7=0.50/1.7= 0.2941
Internal growth rate= 22.94*0.2941= 6.75%
Internal growth rate= 6.75%
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