The most recent financial statements for Bello Co. are shown here: Income Statem

Question

The most recent financial statements for Bello Co. are shown here: Income Statement Balance Sheet Current assets $19,700 $11,860 Deb$16,180 13,440 Fixed assets 29,700 Equity 25,380 Sales Costs Taxable income$ 6,260 Tota $41,560 Tota $41,560 Taxes (25%) 1,565 Net income $4,695 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 30 percent dividend payout ratio What is the internal growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded 2 decimal places, e.g. 32.16.)

Explanation / Answer

return on assets,ROA=net income/total assets

=4695/41560

=0.1130

plowbackratio,b=1-dividened payout ratio

b=1-0.3

=0.7

Internal growth rate=(ROA*b)/(1-ROA*b)

=0.1130*0.7/(1-0.1130*0.7)

=0.0791/0.9209

=0.08589

=8.59%

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