If a company has a return on equity of 25% and wants a growth rate of 10%, how much of ROE should be retained? A. 40% B. 50% C. 60% D. 70%

To determine how much of the return on equity (ROE) should be retained, we need to calculate the retention ratio. The retention ratio is the percentage of earnings that a company chooses to reinvest back into the business for growth purposes.

The formula to calculate the retention ratio is:

Retention Ratio = 1 - (Dividends / Net Income)

In this case, since we want a growth rate of 10%, the retention ratio can be calculated as follows:

Retention Ratio = 1 - (0.10 / 0.25) Retention Ratio = 1 - 0.40 Retention Ratio = 0.60

Therefore, the company should retain 60% of its return on equity.

So, the correct answer is C. 60%.