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Your company's most recent income statement and balance sheet are given below: Income statement ($ million) Balance sheet ($ million) Sales 14 Current assets 11.2

Your company's most recent income statement and balance sheet are given below:

Income statement ($ million) Balance sheet ($ million)
Sales 14 Current assets 11.2 Debt 16.8
Costs 11.2 Fixed assets 44.8 Equity 39.2
Net income 2.8 Total assets 56 Total 56

Sales, assets and costs are expected to grow by the same rate next year, while debt will stay constant. The company is expected to pay NO dividends next year.

Part 1

What is the particular growth rate for the next year, at which company will need zero external financing (EFN=0)? What is the internal growth rate?

2. Your company's most recent income statement and balance sheet are given below:

Income statement ($ million) Balance sheet ($ million)
Sales 19 Current assets 13.2 Debt 19.8
Costs 15.2 Fixed assets 52.8 Equity 46.2
Net income 3.8 Total assets 66 Total 66

Sales, assets and costs are expected to grow by the same rate next year, while debt will stay constant. The company expects to pay out 40% of net income as dividends.

Part 2

What is the particular growth rate for the next year, at which company will need zero external financing (EFN=0)? What is the internal growth rate?

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