Eagle Sports Supply has the following financial statements. Assume that Eagle's assets are proportional to its sales. INCOME STATEMENT, 2019 Sales $ 850 Costs 160 Interest Taxes 40 110 Net income $ 540 BALANCE SHEET, YEAR-END 2018 Assets $ 3,000 2019 $ 3,300 Total $ 3,000 $ 3,300 Debt Equity Total 2018 $ 1,000 2,000 2019 $ 1,100 2,200 $ 3,000 $ 3,300 a. What is the internal growth rate of Eagle Sports if the dividend payout ratio is fixed at 70% and the equity-to-asset ratio is fixed at 2/3? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. b. What is the sustainable growth rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
Eagle Sports Supply has the following financial statements. Assume that Eagle's assets are proportional to its sales. INCOME STATEMENT, 2019 Sales $ 850 Costs 160 Interest Taxes 40 110 Net income $ 540 BALANCE SHEET, YEAR-END 2018 Assets $ 3,000 2019 $ 3,300 Total $ 3,000 $ 3,300 Debt Equity Total 2018 $ 1,000 2,000 2019 $ 1,100 2,200 $ 3,000 $ 3,300 a. What is the internal growth rate of Eagle Sports if the dividend payout ratio is fixed at 70% and the equity-to-asset ratio is fixed at 2/3? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. b. What is the sustainable growth rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
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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Vijay
Transcribed Image Text:Eagle Sports Supply has the following financial statements. Assume that Eagle's assets are proportional to its sales.
INCOME STATEMENT, 2019
Sales
$ 850
Costs
160
Interest
Taxes
40
110
Net income
$ 540
BALANCE SHEET, YEAR-END
2018
Assets
$ 3,000
2019
$ 3,300
Total
$ 3,000
$ 3,300
Debt
Equity
Total
2018
$ 1,000
2,000
2019
$ 1,100
2,200
$ 3,000
$ 3,300
a. What is the internal growth rate of Eagle Sports if the dividend payout ratio is fixed at 70% and the equity-to-asset ratio is fixed at
2/3?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
b. What is the sustainable growth rate?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
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