Final answer:
Major Manuscripts, Inc.'s internal rate of growth is the maximum rate at which the firm can grow using its own profits without external financing. This rate is calculated using return on assets and the retention ratio. Specific financial information is required to accurately determine this rate.
Step-by-step explanation:
The question posed by the student pertains to Major Manuscripts, Inc. and its desire to grow without incurring any additional external financing while maintaining a constant dividend payout ratio. The internal rate of growth refers to the maximum rate at which a firm can expand using only its own profit generation without resorting to external financing, such as issuing new equity or debt. Calculating this rate typically involves understanding the firm's return on assets and the retention ratio (which is the complement of the dividend payout ratio).
If Major Manuscripts, Inc. wants to avoid external financing completely, it means that the firm is looking to finance its growth exclusively through its earnings retention. The internal growth rate can be estimated by using the formula Internal Growth Rate = (Return on Assets × Retention Ratio)/(1 - (Return on Assets × Retention Ratio)). To calculate this further, the specifics of the firm's earnings, return on assets, and dividend policy are necessary.