Question

Consider the following financial figures: Net Current Assets = $100 Net Fixed Assets = $200 Long...

Consider the following financial figures:

Net Current Assets = $100

Net Fixed Assets = $200

Long Term Debt = $150

Equity = $150

Sales = $1000

Costs = $800

Taxes = $68

Assume that costs and assets increase at the same rate as sales, but debt and equity do not. Also assume that 75% of net income is paid out in dividends, and the firm's fixed assets are being used at FULL capacity. The tax rate is constant. If the company does not wish to issue any new equity or debt, what is the maximum growth rate in sales that they can achieve?

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