Imagine a corporation with $1,000,000 of assets and a debt ratio of 40%. ROE (return on equity) is expected to be 20% for the foreseeable future. Assuming the firm maintains the same amount of debt indefinitely (as opposed to keeping the same debt ratio), respond to the following questions. (12 marks)

a. If the firm doesnt pay out any dividends or re-purchase any shares, what do you expect the firms earnings to be for the next three years?

Complete the table to show your calculations.

Year	Beginning balance, equity	Net income	Return on equity = net income /opening equity	Dividends and/or repurchases	Ending balance, equity
1	600,000	120,000	20%	0	720,000
2	720,000	144,000	20%	0	864,000
3	864,000	172,800	20%	0	1,036,800

b. If the firm doesnt pay any dividends or re-purchase any shares, at what rate would the firm grow from year to year?

Complete the table.

Year	Beginning balance, equity	Net income	Return on equity = net income /opening equity	Dividends and/or repurchases	Ending balance, equity	Growth rate
1	600,000	120000	20%	0	720,000	%
2	720,000	144000	20%	0	864,000	%
3	864,000	172800	20%	0	1036800	%

c. If the firm pays 50% of its earnings as dividends, at what rate would the firm grow from year to year?

Complete the table.

Year	Beginning balance, equity	Net income	Return on equity = net income /opening equity	Dividends	Ending balance, equity	Growth rate
1			%			%
2			%			%
3			%			%

d. If the firm uses 80% of its earnings to re-purchase shares from its shareholders, at what rate would the firm grow from year to year?

Complete the table.

Year	Beginning balance, equity	Net income	Return on equity = net income /opening equity	Repurchases	Ending balance, equity	Growth rate
1			%			%
2			%			%
3			%			%

e. If the firm pays 50% of its earnings as dividends and uses an additional 20% of its earnings to repurchase shares from its shareholders, at what rate would the firm grow from year to year?

Complete the table.

Year	Beginning balance, equity	Net income	Return on equity = net income /opening equity	Dividends	Repur-chases	Ending balance, equity	Growth rate
1			%				%
2			%				%
3			%				%

f. If you have done the calculations correctly in the tables above, you should have the same growth rate every year. How long could the company grow at this constant rate if all the given factors remained the same?

Need some help filling out the blanks. Thanks so much!