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Fairlane company. has an roa of 13 percent and a payout ratio of 26 percent. what is its internal growth rate?

Sagot :

chilljain33

In a condition where Fairline Company has an ROA of 13 percent and a payout ratio of 26, its internal growth rate will be computed to approximately 3.5 percent. Therefore, the option A holds true.

What is the significance of the internal growth rate?

The internal growth rate of a firm can be referred to or considered as the value determined in relation to the Return on Assets and the Dividend Payout Ratio.

Using the information given above as well as the formula, the internal growth rate, or simply IGR, can be computed as,

IGR = ROA x B / 1 – ROA x B

IGR = 0.13×0.26 / 1−0.13×0.26

IGR = 0.035

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Therefore, the option A holds true and states regarding the significance of the internal growth rate.

Learn more about the internal growth rate here:

https://brainly.com/question/28428895

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The missing options to the incomplete question have been added below for better reference.

A. 3.5

B. 2.0

C. 0.5

D 2.8

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