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A firm has $50M in equity and $25M in debt and forecasts $12M in net income for the year. It currently pays dividends equal to
A firm has
$50M
in equity and
$25M
in debt and forecasts
$12M
in net income for the year. It currently pays dividends\ equal to
10%
of its net income, You analyze a potential change in payout policy an increase in dividends to
15%
of\ net income, How would this change affect your internal and sustainable growth rates? Determine ROA, ROE, old and\ new retention rate, and both old and new internal and sustainable growth rates. Explain what would the retention and\ growth rates tell you in this case?
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