Major Manuscripts, Inc.
2012 Income Statement |
| Net sales |
$ |
8,800 |
| Cost of goods sold |
|
7,265 |
| Depreciation |
|
320
|
| Earnings before interest and taxes |
$ |
1,215 |
| Interest paid |
|
80
|
| Taxable Income |
$ |
1,135 |
| Taxes |
|
405
|
| Net income |
$
|
730
|
| Dividends |
$ |
292 |
|
Major Manuscripts, Inc.
2012 Balance Sheet
|
|
2012 |
|
|
2012 |
| Cash |
$ |
2,270 |
|
Accounts payable |
$ |
1,170 |
| Accounts rec. |
|
980 |
|
Long-term debt |
|
380 |
| Inventory |
|
3,700
|
|
Common stock |
$ |
3,900 |
| Total |
$ |
6,950 |
|
Retained earnings |
|
5,230
|
| Net fixed assets |
|
3,730
|
|
|
|
|
| Total assets |
$
|
10,680
|
|
Total liabilities & equity |
$
|
10,680
|
If Major Manuscripts, Inc., decides to maintain a constant debt-equity ratio, what rate of growth can it maintain assuming that no additional external equity financing is available?
a) 5.04 percent
b) 9.14 percent
c) 7.83 percent
d) 4.58 percent
e) 4.28 percent