Abbreviated financial statements for Archimedes Levers are shown in the table below. Assume that sales increase by 10% in 2014 and all other items, including debt, increase correspondingly.

Income Statement

Sales                                       $4,000

Costs, including interest          3,500

Net Income                              $500

Balance Sheet, Year-end

                               2013                   2012                                                                     2013                                2012            

Assets                   $3,200                 $2,700                                       Debt                  $1,200                             $1,033

                                                                                                             Equity                 2,000                               1,667

Total                       $3,200                 $2,700                                       Total                 $3,200                             $2,700

A.)  If the payout ratio is set at 50% and no external debt or equity is to be issued, what is the maximum possible growth rate for Archimedes?

B.) If the payout ratio is set at 50% and the firm maintains a fixed debt ratio but issues no equity, what is the maximum possible growth rate for Archimedes?