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?

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 intemal 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