Pre-Tax Weighted Average Cost of Debt | E+D After-Tax Weighted iD (1- Tc) 0.207831 % 0.1 56538309290 Cost of Debt Weighted Average Cost of | ie+--w 227 Capital Part B: Dividend Payout and Growth Ratios Recall from Module 1 the following two ratios: Internal growth rate (ROA RR)/[1-(ROA RR)] (Eq. 3-30) where RRRetention ratio (Addition to retained earnings)/Net income (Eq. 3-31) -The internal growth rate measures the amount of growth a firm can sustain if it uses only internal financing (retained earnings) to increase assets Sustainable growth rate (ROE RR) 1-(ROE RR)] (Eq. 3-33) -If the firm uses retained earnings to support asset growth, the firm's capital -To maintain the same capital structure managers must use both debt and equity -The sustainable growth rate measures the amount of growth a firm can achieve structure will change over time, i.e., the share of equity will increase relative to debt financing to support asset growth using internal equity and maintaining a constant debt ratio 1. For the firm selected for Part A, calculate its internal growth rate for the last fiscal year: = (ROA , RR) / [1-(ROA-RR)] Pre-Tax Weighted Average Cost of Debt | E+D After-Tax Weighted iD (1- Tc) 0.207831 % 0.1 56538309290 Cost of Debt Weighted Average Cost of | ie+--w 227 Capital Part B: Dividend Payout and Growth Ratios Recall from Module 1 the following two ratios: Internal growth rate (ROA RR)/[1-(ROA RR)] (Eq. 3-30) where RRRetention ratio (Addition to retained earnings)/Net income (Eq. 3-31) -The internal growth rate measures the amount of growth a firm can sustain if it uses only internal financing (retained earnings) to increase assets Sustainable growth rate (ROE RR) 1-(ROE RR)] (Eq. 3-33) -If the firm uses retained earnings to support asset growth, the firm's capital -To maintain the same capital structure managers must use both debt and equity -The sustainable growth rate measures the amount of growth a firm can achieve structure will change over time, i.e., the share of equity will increase relative to debt financing to support asset growth using internal equity and maintaining a constant debt ratio 1. For the firm selected for Part A, calculate its internal growth rate for the last fiscal year: = (ROA , RR) / [1-(ROA-RR)]