A firm wishes to maintain an internal growth rate of 9.75 percent and a dividend payout ratio of 43 percent. The current profit margin is 6.5 percent and the firm uses no external financing sources. What must total asset turnover be?

A firm wishes to maintain an internal growth rate of 9.75 percent and a dividend payout ratio of 43 percent. The current profit margin is 6.5 percent and the firm uses no external financing sources. What must total asset turnover be?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

H3. A firm wishes to maintain an sustainable growth rate of 9 percent and a dividend payout ratio of 64 percent. The ratio of total assets to sales is constant at 0.9, and the profit margin is 10.1 percent. If the firm also wishes to maintain a constant debt-equity ratio, what must it be? Please show proper step by step calculation
Although Company A and Company B have similar returns on 口 equity, what is the primary driver for each company having a higher return than the industry? Net Proft Entity Total Asset Leverage Return on Margin Turnover Multiplier Equity Company A 7% 1.25 2.5 21.88% Company B 15% 1.30 1.3 25.35% Industry 8% 1.30 1.5 15.6% O Company A is more efficient at using its assets to generate sales, while Company B uses a significantly higher amount of debt to purchase assets. O Company A is more efficient at using its operations to generate profits, while Company B is more efficient than the industry at using its assets to generate sales. O Company A and Company B are both more efficient at using their assets to generate sales as compared to the industry average. O Company A uses a significantly higher amount of debt to purchase assets, while Company B has better operating efficiency.
As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company’s stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $1.92 per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by 12.00% over the next year. After the next year, though, Portman’s dividend is expected to grow at a constant rate of 2.40% per year. Assuming that the market is in equilibrium, use the information just given to complete the table. Term Value Dividends one year from now (D₁) Horizon value (Pˆ1P̂1) Intrinsic value of Portman’s stock The risk-free rate (rRFrRF) is 3.00%, the market risk…
None
A firm wishes to maintain an internal growth rate of 11 percent and a dividend payout ratio of 52 percent. The ratio of total assets to sales is constant at 1.1, and the profit margin is 9.6 percent. If the firm also wishes to maintain a constant debt-equity ratio, what must it be?
As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company’s stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $3.12 per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by 16.00% over the next year. After the next year, though, Portman’s dividend is expected to grow at a constant rate of 3.20% per year.
Suppose a firm has a retention ratio of 31 percent and net income of $4.6 million. How much does it pay out in dividends? (Enter your answer in dollars not in millions.) DIVIDEND PER SHARE
Suppose Goodyear Tire and Rubber Company has an equity cost of capital of 7.6%, a debt cost of capital of 6.1%, a marginal corporate tax rate of 21%, and a debt-equity ratio of 2.8. Assume that Goodyear maintains a constant debt-equity ratio. a. What is Goodyear's WACC? b. What is Goodyear's unlevered cost of capital? c. Explain, intuitively, why Goodyear's unlevered cost of capital is less than its equity cost of capital and higher than its WACC. a. What is Goodyear's WACC? The WACC is%. (Round to two decimal places.)
As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $3.12 per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by 16.00% over the next year. After the next year, though, Portman's dividend is expected to grow at a constant rate of 3.20% per year. Assuming that the market is in equilibrium, use the information just given to complete the table. Term Dividends one year from now (D.) Horizon value (P) Intrinsic value of Portman's stock Value The risk-free rate (TRF) IS 4.00%, the market risk premium (RPM) is 4.80%, and Portman's beta is 1.30.…
A firm has a debt-equity ratio of 0.5 and a cost of debt of 5 percent. The industry average cost of unlevered equity is 15 percent. What is the weighted average cost of capital for this firm? Ignore tax. O 0.12 O 0.13 0.14 O 0.15
Which of the following are assumptions of the self-supporting growth model? Check all that apply. The firm’s total asset turnover ratio remains constant. The firm maintains a constant net profit margin. The firm maintains a constant ratio of assets to equity. The firm must issue the same number of new common shares that it issued last year.
Suppose Goodyear Tire and Rubber Company has an equity cost of capital of 8.6%, a debt cost of capital of 7.1%, a marginal corporate tax rate of 24%, and a debt-equity ratio of 2.5. Assume that Goodyear maintains a constant debt-equity ratio. a. What is Goodyear's WACC? b. What is Goodyear's unlevered cost of capital? c. Explain, intuitively, why Goodyear's unlevered cost of capital is less than its equity cost of capital and higher than its WACC. Question content area bottom Part 1 a. What is Goodyear's WACC? The WACC is enter your response here%. (Round to two decimal places.)