Suppose the Firm Retains 28% of Earnings, While Assets and Costs

question 79

Multiple Choice

Suppose the firm retains 28% of earnings, while assets and costs maintain a constant percentage of sales. If the firm is producing at full capacity, what is the internal growth rate?

• A) 1.9%
• B) 4.8%
• C) 10.1%
• D) 13.5%
• E) 17.3%

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Definitions:

Interest Receivable

An accounting term for interest income that has been earned but not yet received in cash.

Common Stock

Common stock represents ownership shares in a corporation, giving shareholders voting rights and a residual claim on the corporate earnings in the form of dividends.

Par

The face value of a security or bond, which is the amount paid back to the investor when the security or bond matures.

Gain Or Loss

The financial result from the difference between the selling price and the purchase cost of an asset.