What Is the Maximum Internal Growth Rate Consistent with Not

question 62

Multiple Choice

What is the maximum internal growth rate consistent with not requiring external funding for a firm reporting net income of $500,000, a dividend payout ratio of 40%, and total assets of $10 million?

• A)2%
• B)3%
• C)5%
• D)6% Internal growth rate = retained earnings/assets
• = ($500,000 x .06)/$10 million
• = $300,000/10 million

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