# Question 8: (10 points). (Measuring growth) Given that a firm's return on equity is 22 percent...

###### Question:

Question 8: (10 points). (Measuring growth) Given that a firm's return on equity is 22 percent and management plans to retain 37 percent of earnings for investment purposes, what will be the firm's growth rate? If the firm decides to increase its retention rate, what will happen to the value of its common stock? (Round to two decimal places.) a. The firm's growth rate will be b. If the firm decides to increase its retention ratio, what will happen to the value of its common stock? An increase in the retention rate will (increase/decrease) the rate of growth in dividends, which in turn will (increase/decrease) the value of the common stock

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