Question
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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