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A. Abbreviated financial Statements for Archimedes Levers are shown in the following table. If sales increase by 10% in 2011 and all other items, including

A. Abbreviated financial Statements for Archimedes Levers are shown in the following table. If sales increase by 10% in 2011 and all other items, including debt, increase correspondingly, what must be the balancing item? What will be its value? B. What is the maximum possible growth rate for Archimedes if the payout ratio is set at 50% and (a) no external debt or equity is to be issued? (b) the firm maintains a fixed debt ratio but issues no equity? INCOME STATEMENT Sales $4000 Costs, including interest 3,500 Net income $500 BALANCE SHEET, YEAR END 2010 2009 2010 2009 Assets $3200 $2700 Debt $1200 $1033 - - - Equity 2,000 1,667 Total $3200 $2700 Total $3200 $2700

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