First 2 are right just not sure how to get the last one Chap

First 2 are right just not sure how to get the last one

Chapter 4-Homework (12-1416, 17 21 22) Question fot 6 100 points Problem 4-21 Sustainable Growth and Outside Financing [LOS) Net income Dividerrls Total deb Total equty 62.000 $ 9,000 $ 90,000 What is the sustanable growth rate for the company? (Do not round intermediate calculations. Round your answer to 2 decimal places. (a9-32.161? 877 it it does grow at this rate, how much new bonowing will take place in the coming year, assuming a constare debr-eqity ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places (o.g. 3216) 7017 54 What growth rate coud be supported with no outside financing at all? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g, 32.16))

Solution

The growth rate that can be supported with no outside financing is the internal growth rate.

To calculate the internal growth rate, we first need the ROA, which is:

ROA = Return / Total assets

= $14,000 / ($80,000+$62,000)

= 0.09859

= 9.86%

The retention ratio is:

b = 1 - payout ratio

= 1 - $9,000 / $14,000

= 0.35714

= 35.714%

This means the internal growth rate is:

Internal growth rate = (ROA × b) / [1 – (ROA × b)]

Internal growth rate = 0.0365, or 3.65%

Internal growth rate = (ROA × b) / [1 – (ROA × b)]