My company had net income last year of $40, additions to retained earnings of $10, total...

My company had net income last year of $40, additions to retained earnings of $10, total assets of $319, and total debt of $250. Assuming I can’t use any external financing, what is the fastest I could grow my company while maintaining a constant dividend payout rate? Enter your answer as a percent. That is, input 5.14 instead of 0.05137 (If necessary round to nearest hundredth of a percent.)

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Expert Solution

Return on Equity = Net Income/(Total Assets - Total Debt)

= 40/(319-250)

= 57.97%

Payout ratio = 30/40 = 75%

Growth rate = ROE*(1-Payout ratio)

= 57.97%*(1-75%)

= 14.4925%

i.e. 14.49%

jeff jeffy answered 1 year ago

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