Go Go Industries is growing at 40% per year. It is all-equity-financed and has t

Question

Go Go Industries is growing at 40% per year. It is all-equity-financed and has total assets of $1 million. Its return on equity is 35%. Its plowback ratio is 60%.

What is the internal growth rate? (Enter your answer as a percent rounded to 2 decimal places.)

What is the firm’s need for external financing this year? (Enter your answer in dollars not in millions. Do not round intermediate calculations.)

By how much would the firm increase its internal growth rate if it reduced its payout ratio to zero?(Enter your answer as a whole percent.)

Calculate the revised required external financing. (Enter your answer in dollars not in millions. Do not round intermediate calculations.)

Go Go Industries is growing at 40% per year. It is all-equity-financed and has total assets of $1 million. Its return on equity is 35%. Its plowback ratio is 60%.

Explanation / Answer

a) Internal growth rate 21.00% 35%*60% b) EFN $ 190,000.00 1000000*(40%-21%) c) Internal growth rate 35.00% 35%*100% d) EFN $    50,000.00 1000000*(40%-35%)

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