Reference no: EM131931811

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 $4.10 Accounts payable 8.25 Receivable 29.50 Notes payable 16.75 Inventories 54.00 Line of credit 0.00 Total current assets 87.60 Accruals 10.30 Net fixed assets 46.00 Total current liabilities 35.30 mortgage 3.00 Common stock 14.25 Retained earnings 81.05 Total assets 133.60 Total liabilities and equity 133.60 Sales for 2013 were $377.00 million and net income for the year was $11.35 million, so the firm’s profit margin was 3.0106%. Upton paid dividends of $4.20 million to common stockholders, so its payout ratio was 30.50%. 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?