1. Subsidiary sustainable growth rate (10 marks)

Wally is pleased with your work. He asks you for help on one more project and then you can take a well-deserved break! He gives you this information that he has collected on one of TimCos key subsidiaries, Oscar & Ollie Inc.:

• Sales = $165,000
• Net Income = $14,800
• Dividends = $9,300
• Total Debt = $68,000
• Total Equity = $51,000

Wally wants to know

1. What is the sustainable growth rate? (4 marks)
2. If Oscar & Ollie grows at this rate, how much new borrowing will take place in the coming year, assuming a constant debtequity ratio? (2 marks)
3. What growth rate could be supported with no outside financing at all? (2 marks)