Question: Recall from Module 1 the following two ratios: Internal growth rate = (ROA RR) / [1-(ROA RR)] where RR = Retention ratio = (Addition to retained earnings)/Net income -The internal growth rate measures the amount of growth a firm can sustain if it uses only internal financing (retained earnings) to increase assets Sustainable growth rate = (ROE RR) / [1-(ROE RR)] - If the firm uses retained earnings to support asset growth, the firm's capital structure will change over time, i.e., the share of equity will increase relative to debt - To maintain the same capital structure managers must use both debt and equity financing to support asset growth - The sustainable growth rate measures the amount of growth a firm can achieve using internal equity and maintaining a constant debt ratio

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Part B: Dividend Payout and Growth Ratios Recall from Module 1 the following two ratios: Internal growth rate = (ROA-RR) / [1-(ROA-RR)] Eq. 3-30) where RR = Retention ratio = (Addition to retained earnings)Net income (Eq. 3-31) The internal growth rate measures the amount of growth a firm can sustain if it uses only internal financing (retained earnings) to increase assets Sustainable growth rate (ROE RR) [1-(ROE RR)] (Eq. 3-33) If the firm uses retained earnings to support asset growth, the firm's capital structure will change over tme, 1.e., the share of equity will ncrease relative to debt To maintain the same capital structure managers must use both debt and equity financing to support asset growth The sustainable growth rate measures the amount of growth a firm can achieve using internal equity and maintaining a constant debt ratio - 1. Calculate Chevron's its internal growth rate for the last fiscal year (ROA . RR) [1-(ROA RR)] Part B: Dividend Payout and Growth Ratios Recall from Module 1 the following two ratios: Internal growth rate = (ROA-RR) / [1-(ROA-RR)] Eq. 3-30) where RR = Retention ratio = (Addition to retained earnings)Net income (Eq. 3-31) The internal growth rate measures the amount of growth a firm can sustain if it uses only internal financing (retained earnings) to increase assets Sustainable growth rate (ROE RR) [1-(ROE RR)] (Eq. 3-33) If the firm uses retained earnings to support asset growth, the firm's capital structure will change over tme, 1.e., the share of equity will ncrease relative to debt To maintain the same capital structure managers must use both debt and equity financing to support asset growth The sustainable growth rate measures the amount of growth a firm can achieve using internal equity and maintaining a constant debt ratio - 1. Calculate Chevron's its internal growth rate for the last fiscal year (ROA . RR) [1-(ROA RR)]