Dishwasher’s Delights plows back 70.00% of its earnings to take on projects that earn the firm a rate of return of 14.00%. Dishwasher’s stockholders require a return of 13.50% on their common stock. Earnings per share are expected to be $6.00 next year. a. What is the expected growth rate for Dishwasher’s common stock?

= 9.80%

Explanation:

Plowback ratio fundamental analysis ratio that measures how much earnings are retained after dividends are paid out.

The expected growth rate equals the return on equity times the plowback ratio:  

We can use the relationship g = ROE × b to find the plowback ratio.

= 14.00% × 0.70 = 9.80%

The growth rate in dishwashers common stock is 9.8%

Explanation:

The growth rate can be calculated by multiplying the company's ROE by the Retention Ratio commonly denoted as b

The retention ratio is given as 70%(plow back)

And we are told that the firm earns 14 % from projects taken using earnings

g = ROE * b

   = 14% * 70%

    =9.8%

answer; interviews;

if you use only 25 for your entertainment and only 200 for the groceries that you really need and take out the 50 per month for the computer then that should be enough