1. Given the following information about a farm business:

• Debt-to-equity ratio = 2.0
• Expected return on assets = 12%
• Expected interested rate on debt = 8%
• Consumption rate = 60%
• Tax rate = 20%
• Standard deviation of return on assets = 4%
• Standard deviation of interest rates = 2%

Answer the following questions: (10 points total)

1. What is the expected rate at which this farm will grow?