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Question
Lane Manufacturing needs to determine the amount of growth the firm could experience without having to obtain external financing. The current sales level is $800,000, the net profit margin is 6 percent, and the dividend payout ratio is 40 percent. Assume the firm is currently operating at full capacity and all assets will increase proportionately with sales. Lane's current balance sheet follows:| Cash | $ 30,000 | Accounts payable | $140,000 | |
| Accounts receivable | 90,000 | Notes payable | 50,000 | |
| Inventories | 110,000 | Long-term debt | 280,000 | |
| Net fixed assets | 380,000 | Common stock | 40,000 | |
| $610,000 | Retained earnings | 100,000 | ||
| $610,000 |
a. 6.53%
b. 1.09%
c. 11.97%
d. 13.50%
Answer
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