# Question

Define the following:

S = Previous year’s sales

A = Total assets

E = Total equity

g = Projected growth in sales

PM = Profit margin

b = Retention (plowback) ratio

Assuming all debt is constant, show that EFN can be written as follows:

EFN = -PM(S) b + (A - PM(S) b ) * g

S = Previous year’s sales

A = Total assets

E = Total equity

g = Projected growth in sales

PM = Profit margin

b = Retention (plowback) ratio

Assuming all debt is constant, show that EFN can be written as follows:

EFN = -PM(S) b + (A - PM(S) b ) * g

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