Growth Rates based on the result in Problem 31, show

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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