Here are the abbreviated financial statements for Planner's Peanuts: INCOME STATEMENT, 2019 Sales Cost Net income Assets Total $ 3,500 2,700 $ 800 BALANCE SHEET, YEAR-END 2019 2018 $ 4,500 $ 5,000 $ 4,500 $ 5,000 Debt Equity Total 2019 2018 $ 833 3,667 $ 1,000 4,000 $ 4,500 $ 5,000 Assume the payout ratio is 50%. a. Calculate the internal growth rate where no external debt or equity is to be issued. Note: Do not round intermediate calculations. Enter your answer as a whole percent. b. Calculate the sustainable growth rate where the firm maintains a fixed debt ratio but issues no equity.

Here are the abbreviated financial statements for Planner's Peanuts: INCOME STATEMENT, 2019 Sales Cost Net income Assets Total $ 3,500 2,700 $ 800 BALANCE SHEET, YEAR-END 2019 2018 $ 4,500 $ 5,000 $ 4,500 $ 5,000 Debt Equity Total 2019 2018 $ 833 3,667 $ 1,000 4,000 $ 4,500 $ 5,000 Assume the payout ratio is 50%. a. Calculate the internal growth rate where no external debt or equity is to be issued. Note: Do not round intermediate calculations. Enter your answer as a whole percent. b. Calculate the sustainable growth rate where the firm maintains a fixed debt ratio but issues no equity.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter8: Current And Contingent Liabilities

Section: Chapter Questions

Problem 2MCQ

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