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Homework answers / question archive / Using the information in the following table, calculate this company's:   Net Income 50,000 Beginning Total Assets 400,000 Beginning Stockholder's Equity 250,000 Payout Ratio 0%     Internal growth rate

Using the information in the following table, calculate this company's:   Net Income 50,000 Beginning Total Assets 400,000 Beginning Stockholder's Equity 250,000 Payout Ratio 0%     Internal growth rate

Finance

Using the information in the following table, calculate this company's:

 

Net Income

50,000

Beginning Total Assets

400,000

Beginning Stockholder's Equity

250,000

Payout Ratio

0%

 

 

  1. Internal growth rate.
  2. Sustainable growth rate.
  3. Sustainable growth rate if it pays out 40% of its net income as a dividend.

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a.)

Internal growth rate = Return on asset * (1-payout ratio)

= (50000/400000)*1

= 5/40

= 12.50%

 

b.)

Sustainable growth rate = return on equity*(1-payout ratio)

= (50000/250000)*1

= 20%

 

c.)

Sustainable growth rate if payout is 40% = (50000/250000)*(1-0.4)

= 0.2*0.6

= 0.12 or 12%

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