Question

The most recent financial statements for Live Co. are shown here:

Income Statement
Sales	$17892
Costs	$10081
Taxable Income	?
Taxes (40%)	?
Net Income	?

Balance Sheet
Current Asset	$11392	Debt	$18298
Fixed Asset	$28170	Equity	?

Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 33 percent dividend payout ratio. No external financing is possible.

What is the internal growth rate (in %)?

(Enter your answer as a percentage, omit the "%" sign in your response, and round your answer to 4 decimal places. For example, 1.23456% should be entered as 1.2346)

Answer 1

Income Statement
Sales	$17,892
Costs	$10,081
Taxable Income	$7,811
Taxes (40%)	$3,124.40
Net Income	$4,686.60

Balance Sheet
Current Asset	$11,392
Fixed Asset	$28,170
Total assets	$39,562

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Plowback ratio = b = 1-33% = 67%

.

ROA = Net income / Total assets

ROA = 4686.60 / 39562

ROA = 11.8462161%

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Internal growth rate = ROA x b / (1-(ROA x b))

Internal growth rate = 11.8462161% x 67% / (1-(11.8462161% x 67%))

Internal growth rate (in %) = 8.6212