First 2 are right just not sure how to get the last one Chapter 4-Homework (12-1

Question

First 2 are right just not sure how to get the last one

Chapter 4-Homework (12-1416, 17 21 22) Question fot 6 100 points Problem 4-21 Sustainable Growth and Outside Financing [LOS) Net income Dividerrls Total deb Total equty 62.000 $ 9,000 $ 90,000 What is the sustanable growth rate for the company? (Do not round intermediate calculations. Round your answer to 2 decimal places. (a9-32.161? 877 it it does grow at this rate, how much new bonowing will take place in the coming year, assuming a constare debr-eqity ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places (o.g. 3216) 7017 54 What growth rate coud be supported with no outside financing at all? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g, 32.16))

Explanation / Answer

The growth rate that can be supported with no outside financing is the internal growth rate.

To calculate the internal growth rate, we first need the ROA, which is:

ROA = Return / Total assets

= $14,000 / ($80,000+$62,000)

= 0.09859

= 9.86%

The retention ratio is:

b = 1 - payout ratio

= 1 - $9,000 / $14,000

= 0.35714

= 35.714%

This means the internal growth rate is:

Internal growth rate = (ROA × b) / [1 – (ROA × b)]

Internal growth rate = 0.0365, or 3.65%

Internal growth rate = (ROA × b) / [1 – (ROA × b)]

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.