Question
The financial statements of Eagle Sport Supply are shown in the below table. For simplicity, Cost include interest. Assume that Eagle's assets are proportional to
The financial statements of Eagle Sport Supply are shown in the below table. For simplicity, "Cost" include interest. Assume that Eagle's assets are proportional to its sales. Assume a growth rate of 30%.
Income Statement | |
Sales | $2,750 |
Costs | 1,150 |
Pretax income | 1,600 |
Taxes ( at 30% ) | 480 |
Net income | $1,120 |
Balance Sheet, year-End | |||||
2014 | 2013 | 2014 | 2013 | ||
Assets | $4,,800 | $4,500 | Debt | $1,900 | $1,800 |
Equity | 2,900 | 2,700 | |||
Total | $4,800 | $4,500 | Total | $4,800 | $4,500 |
a. Assume that the dividend payout ratio is fixed at 50% and the equity-to-asset ratio is fixed at two-thirds. What is the internal growth rate of Eagle Sport?
Internal growth rate |
|
b. What is the sustainable growth rate? (round answer 2 decimal places)
Sustainable growth rate |
|
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