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**CFA Practice Question**

Information for a firm:

Required rate of return on equity 12%

Current EPS reported $10

Current dividends per share $8

D/E Ratio 100%

ROE 15%

Required rate of return on equity 12%

Current EPS reported $10

Current dividends per share $8

D/E Ratio 100%

What is the growth rate of the firm?

A. 6.00%

B. 2.40%

C. 3.00%

**Explanation:**Rate of growth = ROE * retention ratio

Retention ratio = (EPS - Div)/EPS

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