A firm generated $697,000 in Sales Revenue, on which it earned Net Income of $139,400. The firmmaintains a constant 40% dividend payout ratio. It ended the year with $1,499,000 in Total Assets,$599,600 in Total Liabilities, and $899,400 in Total Equity. At what annual rate can the firm grow if itis willing to issue additional debt, but not additional equity, and it does not want to change its debt-to-equity relationship? (Enter your answer to the nearest tenth of a percent. Do not enter thepercentage symbol. For example, If your answer is 123.456789%, enter 123.5.)

In sustainable growth rate assumption, the firm will not change its debt equity relationship. We…

Answered: A firm generated $697,000 in Sales…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Blue Co. is funded by both debt and equity with a total debt to total asset ratio of 40%. If the firm has a retained earnings breakpoint of P2,450,000, how much is the additions to the retained earnings during the year?
For the last fiscal year, your firm reported a return on assets (ROA) of 6.0 percent and a return on equity (ROE) of 15 percent. This was on sales of $36,000,000 and total assets of $30,000,000. Your CFO noted that the difference between the firm's basic earnings power (BEP) and its cost of debt (interest rate on debt is 6.4 percent) amplified ROE handsomely. Assuming a tax rate of 40 percent, calculate your firm's basic earnings power. Note: BEP EBIT/ Total Assets. Enter your answer in decimal format to 4-decimal places. For example, if your answer is 9.55%, enter 0.0955.
Bulldogs Inc. is funded by both debt and equity and has a total liabilities to total asset ratio of 45%. If the firm has a retained earnings breakpoint of 3,250,000, how much is the additions to the retained earnings during the year?
Gbenda Corporation has sales of $91,200, net income of $18,240, dividends paid of $3,830, total assets of $456,000, and total liabilities of $182,400. Assume that all costs and assets change spontaneously with sales. The tax rate and dividend payout ratios remain constant. If the firm’s managers project a firm growth rate of 10 percent for next year, what will be the amount of external financing needed to support this level of growth? Assume the firm is currently operating at full capacity.Multiple Choice- $25,536- $29,749- $45,600- $65,664- $41,387
Suppose that Psy Ops Industries currently has the balance sheet shown below, and that sales for the year just ended were $4.4 million. The firm also has a profit margin of 20 percent, a retention ratio of 25 percent, and expects sales of $7.4 million next year. Assets Current $1,980,000 Current liabilities Long-term debt Equity assets Fixed assets 3,700,000 Liabilities and Equity Total assets $5,680,000 Total liabilities and equity $ 1,672,000 1,800,000 2,208,000 $ $5,680,000 If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will Psy Ops need from external sources to fund the expected growth? (Enter your answer in dollars not in millions. Negative amount should be indicated by a minus sign.) Additional funds needed
A firm is fully invested in commercial real estate. The commercial real estate it owns experienced a rate of return of 8% per year, but the equity holders of the firm earned 18% a year. If the firm's debt earns 2% a yeare, what is the firms debt ratio?
Please see image to answer question.
Suppose that Gyp Sum Industries currently has the balance sheet shown below, and that sales for the year just ended were $10.2 million. The firm also has a profit margin of 30 percent and a retention ratio of 20 percent, and expects sales of $8.2 million next year. Assets Current assets Fixed assets Total assets $ 2,124,000 4,200,000 $ 6,324,000 Liabilities and Equity Current liabilities Long-term debt Equity Total liabilities and equity Additional funds needed $ If all assets and current liabilities are expected to shrink with sales, what amount of additional funds will Gyp Sum need from external sources to fund the expected growth? Note: Enter your answer in dollars not in millions. Negative amount should be indicated by a minus sign. Answer is complete but not entirely correct. 1,397,200 x $ 1,707,480 1,600,000 3,016,520 $ 6,324,000
Plank’s Plants had net income of $3,000 on sales of $40,000 last year. The firm paid a dividend of $1,500. Total assets were $200,000, of which $140,000 was financed by debt. What is the firm’s sustainable growth rate? If the firm grows at its sustainable growth rate, how much debt will be issued next year? What would be the maximum possible growth rate if the firm did not issue any debt next year?
RPJ Co. has net Income of $2,937, a profit margin of 6.3 percent, a retention ratio of 45 percent, total assets of $52,800, and total debt of $24,300. Assets, current liabilities, and costs are proportional to sales. The company maintains a constant dividend payout ratio and debt-equity ratio and is operating at full capacity. What is the maximum dollar Increase in sales that can be sustained next year assuming no new equity is issued? Multiple Choice O O O O O $2,151 $1,211 $2,804 $2,267 $1,667
Suppose that Psy Ops Industries currently has the balance sheet shown below, and that sales for the year just ended were $4.4 million. The firm also has a profit margin of 20 percent, a retention ratio of 25 percent, and expects sales of $7.4 million next year. Assets Liabilities and Equity Current assets $ 1,980,000 Current liabilities $ 1,672,000 Fixed assets 3,700,000 Long-term debt 1,800,000 Equity 2,208,000 Total assets $ 5,680,000 Total liabilities and equity $ 5,680,000 If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will Psy Ops need from external sources to fund the expected growth? Note: Enter your answer in dollars not in millions. Negative amount should be indicated by a minus sign.
The newspaper reported last week that Chen Enterprises earned $34.03 million this year. The report also stated that the firm’s return on equity is 12 percent. The firm retains 80 percent of its earnings. a. What is the firm's earnings growth rate? b. What will next year's earnings be?

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