Business College

The most recent financial statements for Bello Co. are shown here: Income Statement Balance Sheet Sales $ 18,900 Current assets $ 11,700 Debt $ 15,700 Costs 12,800 Fixed assets 26,500 Equity 22,500 Taxable income $ 6,100 Total $ 38,200 Total $ 38,200 Taxes (21%) 1,281 Net income $ 4,819 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 30 percent dividend payout ratio. What is the internal growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded 2 decimal places, e.g., 32.16.)

Answers

Answer 1

Answer:

9.69%

Explanation:

Calculate for the internal growth rate

First step is to calculate the ROA

ROA = $4,819/$38,200

ROA=.1262*100

ROA= 12.62%

Second step is to calculate the plowback ratio b

The plowback ratio, b= 1 – .30

b= .70

Now let calculate the Internal growth rate using this formula

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

Let plug in the formula

Internal growth rate=[.1262(.70)]/[1 – .1262(.70)]

Internal growth rate=.0969*100

Internal growth rate= 9.69%

Therefore the internal growth rate will be 9.69%

Related Questions

c. During a conversation with the credit manager, one of Tabor's sales representatives learns that a $1,281 receivable from a bankrupt customer has not been written off but was considered in the determination of the appropriate year-end balance of the Allowance for Bad Debts account balance. What is the effect of write-off on 2019 net income

Answers

Answer:

Tabor

The effect of the write-off of the bad debt or uncollectible is a reduction of the 2019 net income by $1,281.

Explanation:

The write-off of the bad debt also reduces the Allowance for Bad Debts account balance and the Accounts Receivable balance in the account of Tabor by $1,281.  The purpose is to accurately report Tabor's net income by taking into account all expenses and losses, just as all revenues and incomes must be accounted for.  This gives a more accurate picture of Tabor's financial performance during the current financial period.

Damian invests $5,000 today in an account earning 6% per year. How much is the investment worth in 4 years

Answers

Answer:

$6,312

Explanation:

The amount that the investment will be worth in 4 years is known as the future value. We compound the Present Value using the interest rate to determine the future value.

Note : Here I will use a financial calculator to compute the future value

PV = $5,000

r = 6 %

P/yr = 1

n = 4

Pmt = $0

Fv = ?

Thus, the investment will be worth $6,312 in 4 years.

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