Homework Answers
1). Internal Growth Rate = ROA * Retention Rate
= [Net Income / Total Assets] * [Addition to Retained Earnings / Net Income]
= [5 / 54] * [5 / 5] = 0.0926 * 1 = 0.0926, or 9.26%
2). Sustainable Growth Rate = ROE * Retention Rate
= [Net Income / Total Equity] * [Addition to Retained Earnings / Net Income]
= [5 / 37.8] * [5 / 5] = 0.1323 * 1 = 0.1323, or 13.23%
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