2 The most recent financial statements for Live Co are shown here 5 Income

2 the most recent financial statements for live co

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#2: The most recent financial statements for Live Co. are shown here:Income StatementBalance SheetSales$13,250Current Assets$10,400Debt$17,500Costs9,480Fixed assets28,750Equity 21,650Taxable income$3,770Total$39,150Total$39,150Taxes (40%)1,508Net income$2,262Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 30% dividend payout ratio. No external equity financing is possible. What is the internal growth rate? 5
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#3: For the company in the previous problems, what is the sustainable growth rate? 7
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8 ROE = Net Income / Total Equity = $594 / $5,750 = 0.1033 Plowback ratio, b = 1 – Dividend Payout Ratio = 1 – 0.4 = 0.6 Sustainable Growth Rate = (ROE x b)/[1-(ROE x b)] = (0.1033x0.6) / [1 – (0.1033x0.6)] = 0.06607 or 6.61% Question 1 Summer Tyme, Inc.
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