What is the maximum growth rate the firm

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Reference no: EM131308380

Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Upton’s balance sheet as of December 31, 2013, is shown here (millions of dollars): Cash $5.45 Accounts payable 10.25 Receivable 21.00 Notes payable 13.00 Inventories 57.00 Line of credit 0.00 Total current assets 83.45 Accruals 8.30 Net fixed assets 65.00 Total current liabilities 31.55 mortgage 4.00 Common stock 16.75 Retained earnings 96.15 Total assets 148.45 Total liabilities and equity 148.45 Sales for 2013 were $361.00 million and net income for the year was $20.20 million, so the firm’s profit margin was 5.5956%. Upton paid dividends of $4.20 million to common stockholders, so its payout ratio was 33.75%. Its tax rate was 40%, and it operated at full capacity. Assume that all assets/sales ratios, spontaneous liabilities/sales ratios, the profit margin, and the payout ratio remain constant in 2014. b. Using the AFN equation, determine Upton’s self-supporting growth rate. That is, what is the maximum growth rate the firm can achieve without having to employ nonspontaneous external funds? Below are answer choices. choose one 13.44% 12.29% 11.49% 12.86% 11.94%

Reference no: EM131308380

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