The most recent financial statements for Shinoda Manufacturing Co. are shown below: Income Statement Balance Sheet Sales $ 63,900 Current assets $ 26,500 Debt $ 42,700 Costs 44,830 Fixed assets 79,400 Equity 63,200 Taxable income $ 19,070 Total $ 105,900 Total $ 105,900 Tax (40%) 7,628 Net Income $ 11,442 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 40 percent dividend payout ratio. No external financing is possible. What is the internal growth rate

Question

Jayce Juarez

Business

16 February, 07:25

The most recent financial statements for Shinoda Manufacturing Co. are shown below: Income Statement Balance Sheet Sales $ 63,900 Current assets $ 26,500 Debt $ 42,700 Costs 44,830 Fixed assets 79,400 Equity 63,200 Taxable income $ 19,070 Total $ 105,900 Total $ 105,900 Tax (40%) 7,628 Net Income $ 11,442 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 40 percent dividend payout ratio. No external financing is possible. What is the internal growth rate

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Marin Travis · Answer 1

The internal growth rate is 6.93%

Explanation:

In order to calculate the internal growth rate we would have to calculate the following formula:

Internal growth rate = (ROA * b) / [1 - (ROA * b) ]

ROA = Net income / Total assets

ROA = $11,442/$105,900=10.80%

plowback ratio = b = 1 - Payout ratio = 1-0.40=60%

Therefore, Internal growth rate = (10.80%*60%) / (1 - (10.80%*60%))

Internal growth rate = 6.93%

The internal growth rate is 6.93%