A firm wishes to maintain an internal growth rate of 4.5 percent and a dividend payout ratio of 60 percent.The current profit margin is 7.5 percent and the firm uses no external financing sources.What must the total asset turnover be?
A)0.98
B)1.06
C)1.21
D)1.44
E)1.59

Question

Quizplus · Accepted Answer

Internal growth rate = 0.045 = [0.075 × TAT × (1 - 0.60)]/{1 - [0.075 × TAT × (1 - 0.60)]}; TAT = 1.44

A Firm Wishes to Maintain an Internal Growth Rate of 4.5