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An all-equity-financed firm plans to grow at an annual rate of 10%. Its return on...

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Finance

An all-equity-financed firm plans to grow at an annual rate of 10%. Its return on equity is 18%.

a) What must be the dividend payout rate the firm can maintain without resorting to additional equity issues (i.e., no external financing)?

b) If the firm decides to grow at a rate of 15%, what will be the need for external financing if assets were $1,000,000? (Assume that the dividend payout ratio found in part a) remains the same)

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