(Measuring growth)Given that afirm's return on equity is 22 percent and management plans to retain 42 percent of earnings for investmentpurposes, what will be thefirm's growthrate? If the firm decides to increase its retentionrate, what will happen to the value of its commonstock?

a.Thefirm's growth rate will be -----%. (Round to two decimalplaces.)

b.If the firm decides to increase its retentionratio, what will happen to the value of its commonstock?(Select from thedrop-down menus.)

An increase in the retention rate will

increase or decrease

the rate of growth individends, which in turn will

increase or decrease the value of the common stock.