McCoy Group's stock price had been lagging its industry averages, so its board of directors brought in a new CEO, Bradon Lee. Lee had brought in Leah Smith, a finance MBA who had been working for a consulting company, to replace the old CFO, and Lee asked Leah to develop the financial planning section of the strategic plan. In her previous job, Smith's primary task had been to help clients develop financial forecasts, and that was one reason Lee hired her. Smith began as she always did, by comparing McCoy Group's financial ratios to the industry averages. If any ratio was substandard, she discussed it with the responsible manager to see what could be done to improve the situation. The following data shows McCoy Group's latest financial statements plus some ratios and other data that Smith plans to use in her analysis (Millions of Dollars Except Per Share Data) Balance Sheet, 12/31/2017 Income Statement, Year Ending 2017 Cash $ 20 Sales $2,000 Selected Other Data Op costs/Sales 2017 90.0% Accts. rec. 280 Op. costs (excl. depr.) 1,800 Depr/FA 10.0% Inventories 400 Depreciation 50 Cash/Sales 1.0% Total CA $ 700 EBIT $ 150 Receivables/Sales 14.0% Net fixed assets 500 Interest 40 Inventories/Sales 20.0% Total assets $1.200 Pretax earnings $ 110 Fixed assets/Sales 25.0% Taxes (40%) 44 Acc. pay & accr. / Sales 4.0% Accts pay. & accruals $ 80 Net income $ 66 Tax rate 40.0% Line of credit $0 Profit margin (M) 3.30% Total CL $ 80 Dividends $20.0 Sales/Assets 1.67 Long-term debt 500 Add. to RE $46.0 Assets/Equity 1.94 Total liabilities Common stock Retained earnings $ 580 Common shares 10.0 Total liability/Total assets 48.3% 420 EPS $6.60 Return on assets (ROA) 5.5% 200 DPS $2.00 Return on equity (ROE) 10.6% Total common equ Total liab. & equity $620 Ending stock price $1.200 $52.80 Target WACC 10.0% Note: McCoy Group was operating at full capacity in 2017, it has no preferred stocks and short-term investment. Assume that McCoy Group's sale growth rate is 10% from 2017 to 2018. Assume that the firm's 2017 ratios will remain the same in 2017. What is McCoy Group's self- supporting growth rate? How the self-supporting growth rate be affected by an increase in capital intensity ratio?