Based on the following data for the Arab Company, sales for the first year are $1,900,000. Income before interest and tax is 12.5% of sales. The tax rate is 35%. The asset turnover ratio is 2.30. The retention ratio is 0.60. The financial leverage ratio is 1.0 (there is no debt on the company). The interest rate is 10%. Equity at the beginning of the year is $400,000. Solve the next questions based on this scenario.

1. What is the continuous rate g* of the Arab Company?

a. 0.1065

b. 0.292

c. 0.1420

d. 0.052

e. None of the above

1. If the goal is for the company's revenues to reach $6,600,000 in the seventh year, then the growth rate that achieves the company's goal is:

a. 0.1044

b. 0.02925

c. 0.1421

d. 0.2306

e. None of the above

Answer rating: 100% (QA)

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