Plank’s Plants had net income of $2,000 on sales of $100,000 last year. The firm paid a dividend of $320. Total assets were $100,000, of which $30,000 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 2 decimal places.)
Maximum growth rate %