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Asymmetric Frames Corp. had a return on equity of​ 15%. The​ corporation's earnings per share was​ $6.00, its dividend payout ratio was​ 40% and its profitminusretention rate was​ 60%. If these relationships​ continue, what will be United Financial​ Corp.'s internal growth​ rate?A.​8.6%B.​6.0%C.​15.6%D.​9.0%

Respuesta :

Answer:

D. 9.0%

Explanation:

Provided return on equity = 15% = K[tex]_e[/tex]

Earnings per share = $6.00

Dividend = 40% = $6 [tex]\times[/tex] 0.4 = $2.40

Internal Growth Rate = Cost of equity [tex]\times[/tex] (1 - Dividend payout ratio)

Putting values in above we have

Internal growth rate = 15% [tex]\times[/tex] (1 - 40%)

= 15% [tex]\times[/tex] 60%

= 9%

Therefore, correct option is

D. 9.0%

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