Eagle Sports Supply had net income of $2,000 on sales this year. The firm paid a dividend of $500 and retained the rest earnings for financing for the next year. Total assets were $100,000, of which $40,000 was financed by debt. The rest were financed by equity.
(a) What is the firm’s internal growth rate?
(b) What is the firm’s sustainable growth rate?
(c) If the firm grows at its sustainable growth rate, how much new debt will be issued in the next year?
