Bally forward firm has a growth rate of 30% per year. It is an all equity financed and has totally addicts of $1 million. Its return on equity is 20%. its plow back is 40%.

a. what is the internal growth rate?

b. what is the firm's need for external financing this year?

c. By how much would the firm increase its internal growth rate, if it reduced its payout ratio to zero?

d. By how much would such a move reduce the need for external financing? what do you conclude about the relationship between dividend policy and requirements for external financing?

e. Suppose the firm has debt equity ratio of 1/3. What is the maximum dividend payout ratio it can maintain without resorting to any external?