Williams, Inc., has an ROA of 7.4 percent and a payout ratio of 25 percent.

What is its internal growth rate?

(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.) Internal growth rate %

5.88%

Explanation:

The computation of the internal growth rate is shown below:

= (Return on assets * b) : (1 - Return on assets * b)

where,

b = Retention ratio

So, it would be calculated below

= 1 - dividend payout ratio

= 1 - 0.25

= 0.75

Now the internal growth rate is

= (7.4% * 0.75) : (1 - 7.4% * 0.75)

= (0.0555) : (0.9445)

= 5.88%