Question

4.

The most recent financial statements for Bello Co. are shown here: Income Statement Sales Costs Taxable Balance Sheet Current $18,900 assets $ 11,700 Debt $15,700 12,800 Fixed assets 26,500 Equity 22,500 $ 6,100 Tota $38,200 $38,200 income Taxes (21%) 1,281 Net income $ 4,819 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 30 percent dividend payout ratio. What is the internal growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded 2 decimal places, e.g., 32.16)

Answer 1

internal growth rate is the growth rate that can be achieved without obtaining any external funds.

formula used:

internal growth rate = (m*S*(1-d))/(A - (m*S*(1-d)))

where;

m = net profit margin ratio

d = dividend payout ratio

S = current sales

A = total assets