EFN and Sustainable Growth Redo Problem 27 using sales growth rates of 30 and 35 percent in addition to 20 percent, illustrate graphically the relationship between EFN and the growth rate, and use this graph to determine the relationship between them. At what growth rate is the EFN equal to zero? Why is this sustainable growth rate different from that found by using the equation in the text?

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MOOSE TOURS, INC. 2006 Income Statement Sales $845,000 Costs 657,000 Other expenses 17,500 $170,500 Earnings before interest and taxes Interest paid 12,500 $158,000 Taxable income 55,300 Taxes (35%) $102,700 Net income $30,810 Dividends Addition to retained earnings 71,890 MOOSE TOURS, INC. Balance Sheet as of December 31, 2006 Liabilities and Owners' Equity Assets Current assets Current liabilities $ 23,000 $ 62,000 15,000 $ 77,000 Cash Accounts payable Notes payable Accounts receivable 37,000 Inventory 79,000 Total $139,000 $144,000 Total Long-term debt Owners' equity Fixed assets $100,000 Net plant and equipment Common stock and paid-in surplus $375,000 Retained earnings 193,000 Total $293,000 Total liabilities and owners' equity $514,000 $514,000 Total assets