Plank’s Plants had net income of $10,000 on sales of $50,000 last year. The firm paid a dividend of $400. Total assets were $800,000, of which $400,000 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 ____________%