CFA Practice Question

CFA Practice Question

Information for a firm:

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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