Carla Vista, Inc., expects to add $2,234,690 to retained earnings and currently has total assets of...
Carla Vista, Inc., expects to add $2,234,690 to retained earnings and currently has total assets of $25,470,000. If the company has the ability to borrow up to $1 million, how much growth can the firm support if it is willing to borrow to its maximum capacity? (Round answer to 1 decimal place, e.g. 5.2%.)
Growth Rate %
Homework Answers
Addition to Retained Earnings = $2,234,690
Total Assets = $25,470,000
Additional Fund Needed = $1,000,000
Additional Fund Needed = Total Assets * Growth Rate - Addition
to Retained Earnings
$1,000,000 = $25,470,000 * Growth Rate - $2,234,690
$3,234,690 = $25,470,000 * Growth Rate
Growth Rate = $3,234,690 / $25,470,000
Growth Rate = 0.1270 or 12.70%
So, the firm can support a growth rate of 12.70% if it is willing to borrow to its maximum capacity.
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Carla Vista, Inc., expects to add $2,234,690 to retained
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