An All Equity Financed Firm Has an Asset Turnover of 2

An all equity financed firm has an asset turnover of 2 and its plowback ratio is 50%.Determine its net profit in order to finance a 10% internally generated growth.

A) 11%
B) 10%
C) 9%
D) 8% Internal growth rate = Plowback ratio * ROE_BEG *
Since the firm is all-equity financed, Equity/Assets = 1 and
ROE_BEG = ROA_BEG = Net profit margin *Asset turnover.
Therefore, g = Plowback ratio * Net profit margin * Asset turnover
) 08 =.5 * Net profit margin * 2.0
Net profit margin = .08 = 8%