Question

Planks’s Plants had net income of $4,000 on sales of $90,000 last year. The firm paid a dividend of $400. Total

assets were $300,000, of which $180,000 was financed by debt.

A) What is the firm’s sustainable growth rate? ( Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place).

Sustainable Growth Rate_____%

B) If the firm grows at its sustainable growth rate, how much debt will be issued next year? ( Do not round intermediate calculations.)

New Debt_____

C) What would be the maximum possible growth rate if the firm did not issue any debt next year?( Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place).

Maximum Growth Rate______%

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