In: Finance
A firm’s return on equity is 16%, and the management plans to retain 60% of earnings for investment purposes, what will be the firm’s growth rate?
Clearly show which EQUATIONS could be used to solve the problem mathematically
Indicate the detailed steps on how to use FINANCIAL CALCULATOR or Equations from the Textbook to solve the problems.
Information provided:
Return on equity= 16%
Retention rate= 60%
Sustainable growth rate= Return on equity* Retention rate
= 0.16*0.60
= 0.0960*100
= 9.60%.
In case of any query, kindly comment on the solution.