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Filer Manufacturing: define Internal Growth Rate, Compute Plowback Ratio

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Assets and costs are proportional to sales. Debt & equity are not. Filer Manufacturing Co. maintains a constant 40% dividend payout ratio. No external financing is possible. What is the internal growth rate?

How do I determine the addition to retained earnings to compute the plowback ratio?

Attached is the income statement and balance sheet.

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The solution explains the concepts and calculates the answers to the questions about internal growth rate and plowback ratio.

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You have to ascertain addition to retained earnings but it is not given anywhere in the balance sheet.

Now, I will give you another approach, think with an open mind. You have $100 and two options- spend it or retain it for future use or do a mix of the ...

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