MC Qu. 60 Major Manuscripts, Inc. does not want to incur any additional ...

Major Manuscripts, Inc.

2009 Income Statement

Net sales

$7,600

Cost of goods sold

6,665

Depreciation

200

Earnings before interest and taxes

$ 735

Interest paid

22

Taxable Income

$ 713

Taxes

249

Net income

$ 465

Dividends

$ 209

Major Manuscripts, Inc.

2009 Balance Sheet

2009

2009

Cash

$2,200

Accounts payable

$1,650

Accounts rec.

840

Long-term debt

290

Inventory

2,300

Common stock

$2,500

Total

$5,340

Retained earnings

3,950

Net fixed assets

3,050

Total assets

$8,390

Total liabilities & equity

$8,390

Major Manuscripts, Inc. does not want to incur any additional external financing. The dividend payout ratio is constant. What is the firm's maximum rate of growth?

11.11 percent

3.17 percent

3.14 percent

2.56 percent

4.13 percent

I know formula is ROA * b / 1-ROA * b but keep getting something close to 11.11 percent but that is wrong.

I have 5.54% * 55.05% / 1-5.54% * 55.05% = 1.0032897

What am I doing wrong?