EFN Define the following:

S 5 Previous year’s sales A 5 Total assets E 5 Total equity g 5 Projected growth in sales PM 5 Profit margin b 5 Retention (plowback) ratio Assuming that all debt is constant, show that EFN can be written as:

EFN = 2 PM(S)b + [A 2 PM(S)b] × g Hint: Asset needs will equal A 3 g . The addition to retained earnings will equal PM(S) b 3 (1 1 g ).