Williams Inc has an ROA of 95 percent and a payout ratio of

Williams, Inc., has an ROA of 9.5 percent and a payout ratio of 37 percent.

What is its internal growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Internal growth rate=

Solution

Retention ratio=1-payout ratio

=(1-0.37)=0.63

Internal growth rate=(ROA*Retention ratio)/[1-(ROA*Retention ratio)]

=(0.095*0.63)/[1-(0.095*0.63)]

which is equal to

=6.37%(Approx).