Growth Rates based on the result in Problem 31, show that the internal and sustainable growth rates
Question:
Growth Rates based on the result in Problem 31, show that the internal and sustainable growth rates are as given in the chapter.
S = Previous year’s sales
A = Total assets
D = Total debt
E = Total equity
g = Projected growth in sales
PM = Profit margin
b = Retention (plowback) ratio
Show that EFN can be written as follows:
EFN = - PM(S)b + (A - PM(S)b) × g
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We start with the EFN equation we derived in Problem 32 and set it equal to zero EFN 0 PMS...View the full answer
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Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th Edition
Authors: Stephen A. Ross, Randolph W. Westerfield, Bradford D.Jordan
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