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Good Foods has net income of $82,490, total equity of $518,700, and total assets of $1,089,500. The dividend payout ratio is .30. What is the internal growth rate?a. 2.32 percent
b. 3.57 percent
c. 5.60 percent
d. 2.87 percent
e. 4.94 percent

Respuesta :

beritop1089

Answer:

a. 2.32 percent

Explanation:

The formula for internal growth rate(IGR)  = [tex]\frac{ROA *b}{1-(ROA*b)}[/tex]

where b= payout ratio

ROA = return on assets

ROA = Net Income / Total assets

ROA = 82,490/1,089,500

ROA = 0.0757

IGR therefore = (0.0757*0.30) / [1 - (0.0757*0.30) ]

IGR = 0.02271 /0.97723

IGR = 0.0232 or 2.32%

Therefore, the correct choice is A.

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