constant, use the AFN equation to determine the firm's self-supporting growth rate-in other words, the maximum growth rate ACME can achieve without having to employ non-spontaneous external funds. (Equation 9-2, which is 9-1, solving for g)

constant, use the AFN equation to determine the firm's self-supporting growth rate-in other words, the maximum growth rate ACME can achieve without having to employ non-spontaneous external funds. (Equation 9-2, which is 9-1, solving for g)

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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Question

ACME Inc. has the following ratios: A0/S0- 1.3; LO/SO-0.40; profit margin-0.14; and the dividend
payout ratio- .32, or 32%. Sales last year were $85 million. Assuming that these ratios will remain
constant, use the AFN equation to determine the firm's self-supporting growth rate-in other words, the
maximum growth rate ACME can achieve without having to employ non-spontaneous external funds.
(Equation 9-2, which is 9-1, solving for g)

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