Problem: A company had net income of $2000 on sales of $50,000 last year. The company paid a dividend of $500. Total assets were $100,000, of which $40,000 was financed by debt.
a) What is the firm's sustainable growth rate?
b) If the firm grows at its sustainable growth rate, how much debt will be issued next year?
c) What would be the maximum possible rate if the firm did not issue any debt next year?