Assume that an average firm in the office supply business has a 6% after-tax profit margin, a 40% debt/asset ratio, a total assets turnover of 2 times, and a dividend payout ratio of 40%

Please see the attached file.
In order to find that out we need to calculate the Internal Growth Rate (IGR). IGR is the growth rate that a firm can have without resorting to any external financing - debt or equity.
IGR = ROA X b /(1-ROA x b)
Where
ROA = Return on Assets
b = Retention ratio = 1-dividend payout ratio
ROA = Net Income/Assets = Net Income/Sales X Sales /Assets
ROA = Profit Margin X Asset Turnover
Given that
Profit Margin = 6%
Assets Turnover = 2
ROA = 6%X2 = 12%
b = 1-0.4 = 0.6
IGR = 12% X 0.6 /(1-12%X0.6) = 7.76%
The firm can grow at 7.76% without any external financing. The statement is false.
We can verify it this way.
Existing Sales = 100
New Sales at IGR = 100X(1+7.76%) = 107.76
Net Income at 6% = 107.76X6%=6.4656
Retained Earnings = 6.4656X60%=3.88
The Asset Turnover is 2, so increase in assets will be ½ of the increase in sales.
Increase in assets = 7.76/2=3.88
This is matched by the retained earnings
So no new debt or equity is required.