Question

The newspaper reported last week that Bennington Enterprises earned $34.07 million this year. The report also stated that the firm’s return on equity is 16 percent. The firm retains 75 percent of its earnings. What is the firm's earnings growth rate?

Answer 1

Answer:

Earning growth rate will be 12 %

Explanation:

We have given that Bennington Enterprises earned $34.07 million this year.

Return equity = 16 % = 0.16

Retained earning = 75 % = 0.75

We have to find the firm's growth rate

We know that growth rate is given by

Growth rate = Return on equity × retained earning

So firm's growth rate will be equal to = 0.16×0.75 = 0.12

Therefore the earning growth rate will be 12 %