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The 2019 financial statements are presented below. Sales and costs are projected to grow at 20% a year for at least the next 4 years.
The 2019 financial statements are presented below. Sales and costs are projected to grow at 20% a year for at least the next 4 years. Both current assets and current liabilities are projected to rise in proportion to sales. The firm is currently operating at full capacity, so it plans to increase fixed assets in proportion to sales. The firm will maintain a dividend payout ratio. INCOME STATEMENT, 2019 Sales 200,000 Costs 160,000 Taxable income 40,000 Taxes (at 35%) 14,000 Net income 26,000 Dividends 10,400 Addition to retained earnings 15,600 BALANCE SHEET, YEAR-END, 2019 Current assets 40,000 Current liabilities 10,000 Fixed assets 160,000 Long-term debt 100,000 Equity 90,000 Total assets 200,000 Total liabilities & equity 200,000 Instructions: Calculate the internal growth rate and sustainable growth rate for 2020
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