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12-7 Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has

12-7 Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Uptons balance sheet as of December 31, 2013, is shown here (millions of dollars):

Cash

$5.45

Accounts payable

10.25

Receivable

21.00

Notes payable

13.00

Inventories

57.00

Line of credit

0.00

Total current assets

83.45

Accruals

8.30

Net fixed assets

65.00

Total current liabilities

31.55

mortgage

4.00

Common stock

16.75

Retained earnings

96.15

Total assets

148.45

Total liabilities and equity

148.45

Sales for 2013 were $361.00 million and net income for the year was $20.20 million, so the firms profit margin was 5.5956%. Upton paid dividends of $4.20 million to common stockholders, so its payout ratio was 33.75%. Its tax rate was 40%, and it operated at full capacity. Assume that all assets/sales ratios, spontaneous liabilities/sales ratios, the profit margin, and the payout ratio remain constant in 2014. b. Using the AFN equation, determine Uptons self-supporting growth rate. That is, what is the maximum growth rate the firm can achieve without having to employ nonspontaneous external funds?

Below are answer choices. choose one

13.44%
12.29%
11.49%
12.86%
11.94%

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