3. The most recent finanacial statements for Benatar Co. are shown here:

Income Statement Balance Sheet

Sales $15,180 Current Assets $11,500 Current Liab. $24,600

Costs 10,505 Fixed assets 30,800

------- Equity 17,700

Taxable income $ 4,675 -------- -------

Taxes (40%) 1,870 $42,300 $42,300

------- ======== ========

Net Income 2,805

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Assets and costs are proportional to sales. Debt and equity are not.

The company maintains a constant 20% dividend payout ratio. No

external equity financing is possible.

(a) What is the internal growth rate?

(b) What is the sustainable growth rate?

4. The most recent financial statements for Heng Co. are shown below:

Income Statement Balance Sheet

Sales $46,000 Current Assets $ 24,000 Current Liab. $ 51,000

Costs 29,500 Fixed assets 92,000

------- Equity 65,000

Taxable income $16,500 -------- --------

Taxes (40%) 5,610 $116,000 $116,000

------- ======== ========

Net Income $10,890

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Assets and costs are proportional to sales. The company maintains a

constant 30% dividend payout ratio and a constant debt-equity ratio.

What is the maximum increase in sales that can be sustained assuming

no new equity is issued?