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Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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
Transcribed Image Text:The financial statements of Eagle Sport Supply are shown in the table below. For simplicity, "Costs" include interest. Assume that
Eagle's assets are proportional to its sales. Assume a growth rate of 35% in revenue, expenses, and assets in 2023. The tax rate will
remain constant.
Sales
Costs
Income Statement
$ 4,750
2,150
Pretax income
Taxes (at 40.0%)
$ 2,600
1,040
Net income
$ 1,560
Balance Sheet, Year-End
2022
2021
2022
2021
Net assets
$ 6,800
$ 6,500
Total
$ 6,800
$ 6,500
Debt
Equity
Total
$ 2,900
3,900
$ 2,800
3,700
$ 6,800
$ 6,500
a. Assume that the dividend payout ratio is fixed at 50% and the equity-to-asset ratio is fixed at two-thirds. What is the internal
growth rate for 2023?
b. What is the sustainable growth rate for 2023?
Note: For all requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
a. Internal growth rate
b. Sustainable growth rate
%
%
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