The most recent financial statements for Bello Company are shown here: Income Statement Balance Sheet Sales $ 3,400 Current assets $3,614 Debt $ 7,226 Costs 2,244 Fixed assets 8,848 Equity $ 5,236 Taxable $4 $1,156 Total Total 12,462 12,462 Income Taxes (23%) 266 Net Income $ 890 Assets and costs are proportional to sales. Debt and equity are not. The company malntalns a constant 40 percent dividend payout ratlo. What Is the Internal growth rate?
The most recent financial statements for Bello Company are shown here: Income Statement Balance Sheet Sales $ 3,400 Current assets $3,614 Debt $ 7,226 Costs 2,244 Fixed assets 8,848 Equity $ 5,236 Taxable $4 $1,156 Total Total 12,462 12,462 Income Taxes (23%) 266 Net Income $ 890 Assets and costs are proportional to sales. Debt and equity are not. The company malntalns a constant 40 percent dividend payout ratlo. What Is the Internal growth rate?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Other options are: 4.48% 4.58% or 4.38%
Please explain steps to take to find correct answer
Transcribed Image Text:The most recent financial statements for Bello Company are shown here:
Income Statement
Balance Sheet
Sales
$ 3,400 Current assets $ 3,614 Debt
$7,226
Costs
2,244
Fixed assets
8,848 Equity
5,236
Таxable
$
$
$1,156
Total
Total
Income
12,462
12,462
Taxes (23%)
266
Net Income
$ 890
Assets and costs are proportional to sales. Debt and equity are not. The company
malntalns a constant 40 percent dividend payout ratio.
What is the Internal growth rate?
Multiple Cholce
11.36%
2.94%
Expert Solution
Step 1
Internal growth rate (IGR) means maximum level of growth which a company can achieve without any external financing. It is equal to the product of retention ratio and return on assets (ROA).
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