The Dog House has net income of $3,450 and total equity of $8,600.The debt-equity ratio is 0.60 and the payout ratio is 30 percent.What is the internal growth rate?
A)14.47 percent
B)17.78 percent
C)21.29 percent
D)29.40 percent
E)33.33 percent

Question

Quizplus · Accepted Answer

Total assets = $8,600 × (1 + 0.60) = $13,760Return on assets = $3,450/$13,760 = .250727Internal growth = [.250727 × (1 - 0.30]/[1 - (.250727 × (1 - 0.30)] = 21.29 percent

The Dog House Has Net Income of $3,450 and Total