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4) Subsidiary sustainable growth rate ( Wally is pleased with your work. He asks you for help on one more project - and then you can take a well-deserved break! He gives you this information that he has collected on one of TimCo's key subsidiaries, Oscar & Ollie Inc.: • Sales= $165,000 Net Income $14,800 • Dividends = $9,300 Total Debt = $68,000 Total Equity=$51,000 Wally wants to know- (a) What is the sustainable growth rate? (b) If Oscar & Ollie grows at this rate, how much new borrowing will take place in the coming year, assuming a constant debt-equity ratio? (c) What growth rate could be supported with no outside financing at all? |

4) Subsidiary sustainable growth rate ( Wally is pleased with your work. He asks you for help on one more project - and then you can take a well-deserved break! He gives you this information that he has collected on one of TimCo's key subsidiaries, Oscar & Ollie Inc.: • Sales= $165,000 Net Income $14,800 • Dividends = $9,300 Total Debt = $68,000 Total Equity=$51,000 Wally wants to know- (a) What is the sustainable growth rate? (b) If Oscar & Ollie grows at this rate, how much new borrowing will take place in the coming year, assuming a constant debt-equity ratio? (c) What growth rate could be supported with no outside financing at all? |

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter8: Basic Stock Valuation
Section: Chapter Questions
Problem 9MC
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4) Subsidiary sustainable growth rate ( Wally is pleased with your work. He asks you for help on one more project-and then you can take a well-deserved break! He gives you this information that he has collected on one of TimCo's key subsidiaries, Oscar & Ollie Inc.: Sales = $165,000 Net Income = $14,800 Dividends = $9,300 Total Debt = $68,000 %3D Total Equity = $51,000 %3D Wally wants to know- (a) What is the sustainable growth rate? (b) If Oscar & Ollie grows at this rate, how much new borrowing will take place in the coming year, assuming a constant debt-equity ratio? (c) What growth rate could be supported with no outside financing at all?|
Transcribed Image Text:4) Subsidiary sustainable growth rate ( Wally is pleased with your work. He asks you for help on one more project-and then you can take a well-deserved break! He gives you this information that he has collected on one of TimCo's key subsidiaries, Oscar & Ollie Inc.: Sales = $165,000 Net Income = $14,800 Dividends = $9,300 Total Debt = $68,000 %3D Total Equity = $51,000 %3D Wally wants to know- (a) What is the sustainable growth rate? (b) If Oscar & Ollie grows at this rate, how much new borrowing will take place in the coming year, assuming a constant debt-equity ratio? (c) What growth rate could be supported with no outside financing at all?|
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