Internal growth rate: Mandolin Bottlers has net income of $4,272,335 and retains 65 percent of its income every year. If the company's internal growth rate is 8.6 percent, what is the firm's total assets?

Question

Quizplus · Accepted Answer

The correct answer is A.The internal growth rate (IGR) is the rate at which a company can grow without raising external financing. It is calculated as follows:IGR = (Net income * Retention ratio) / Total assetsIn this case, the net income is $4,272,335, the retention ratio is 65%, and the IGR is 8.6%. Therefore, the total assets are:Total assets = (Net income * Retention ratio) / IGRTotal assets = ($4,272,335 * 0.65) / 0.086Total assets = $32,290,904

Internal Growth Rate: Mandolin Bottlers Has Net Income of $4,272,335