The most recent financial statements for Schenkel Co. are shown here: Income Statement Balance Sheet Sales...
The most recent financial statements for Schenkel Co. are shown here:
| Income Statement | Balance Sheet | ||||||||||
| Sales | $ | 14,500 | Current assets | $ | 12,000 | Debt | $ | 16,500 | |||
| Costs | 8,400 | Fixed assets | 29,000 | Equity | 24,500 | ||||||
| Taxable income | $ | 6,100 | Total | $ | 41,000 | Total | $ | 41,000 | |||
| Taxes (40%) | 2,440 | ||||||||||
| Net income | $ | 3,660 | |||||||||
|
Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 30 percent dividend payout ratio. No external financing is possible. |
|
What is the internal growth rate? |
Homework Answers
ROA=Net income/Total assets
=(3660/41,000)=0.089268292
Retention ratio=1-payout ratio
=(1-0.3)=0.7
Internal growth rate=(ROA*Retention ratio)/[1-(ROA*Retention ratio)]
=(0.089268292*0.7)/[1-(0.089268292*0.7)]
=6.67%(Approx).
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