The most recent financial statements for Live Co. are shown here: Assets and cos

Question

The most recent financial statements for Live Co. are shown here:

Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 33 percent dividend payout ratio. No external financing is possible.

What is the internal growth rate (in %)?

(Enter your answer as a percentage, omit the "%" sign in your response, and round your answer to 4 decimal places. For example, 1.23456% should be entered as 1.2346)

Income Statement Sales $17892 Costs $10081 Taxable Income ? Taxes (40%) ? Net Income ?

Explanation / Answer

Income Statement

Sales

$17,892

Costs

$10,081

Taxable Income

$7,811

Taxes (40%)

$3,124.40

Net Income

$4,686.60

Balance Sheet

Current Asset

$11,392

Fixed Asset

$28,170

Total assets

$39,562

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Plowback ratio = b = 1-33% = 67%

.

ROA = Net income / Total assets

ROA = 4686.60 / 39562

ROA = 11.8462161%

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

Internal growth rate = 11.8462161% x 67% / (1-(11.8462161% x 67%))

Internal growth rate (in %) = 8.6212

Income Statement

Sales

$17,892

Costs

$10,081

Taxable Income

$7,811

Taxes (40%)

$3,124.40

Net Income

$4,686.60

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