Internal Growth Rate Last Year,Marly Brown,Inc

question 42

Essay

Internal Growth Rate Last year,Marly Brown,Inc.,reported an ROE of 30 percent.The firm's debt-to-equity was 2.50 times,sales were $20 million,the capital intensity was 1.5 times,and dividends paid to common stockholders were $500,000.The firm has no preferred stock outstanding.This year,Marly Brown plans to decrease its debt-to-equity ratio to 2.00 times.The change will not affect sales,total assets,or dividends paid,however,it will reduce the firm's profit margin to 10 percent.Use the DuPont equation to determine how the change in Marly Brown's debt ratio will affect its internal growth rate.

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Definitions:

Specific

Distinct or particular to something, not general or vague, often used to describe detailed or focused elements in various contexts.

Measurable

The characteristic of being able to be quantified or assessed through metrics or data.

Realistic

Pertaining to or representing conditions as they actually are; practical and pragmatic in approach or assessment.

Broad

Encompassing a wide range or scope; not limited or narrow.