he financial statements of Eagle Sport Supply are shown in the table below. For simplicity. "Costs" include interest. Assume that agle's assets are proportional to its sales. Assume a growth rate of 35% in revenue, expenses, and assets in 2023. The tax rate will emain constant. Sales Income Statement Costs $ 4,350 1,950 Pretax income Taxes (at 30.0%) $ 2,400 720 Net income $ 1,680 2022 Balance Sheet, Year-End 2021 2022 Net assets $ 6,400 $ 6,100 Total $ 6,400 $ 6,100 Debt Equity Total $ 2,700 3,700 $ 6,400 2021 $ 2,600 3,500 $6,100 a. Assume that the dividend payout ratio is fixed at 50% and the equity-to-asset ratio is fixed at two-thirds. What is the internal growth rate for 2023? b. What is the sustainable growth rate for 2023? Note: For all requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
he financial statements of Eagle Sport Supply are shown in the table below. For simplicity. "Costs" include interest. Assume that agle's assets are proportional to its sales. Assume a growth rate of 35% in revenue, expenses, and assets in 2023. The tax rate will emain constant. Sales Income Statement Costs $ 4,350 1,950 Pretax income Taxes (at 30.0%) $ 2,400 720 Net income $ 1,680 2022 Balance Sheet, Year-End 2021 2022 Net assets $ 6,400 $ 6,100 Total $ 6,400 $ 6,100 Debt Equity Total $ 2,700 3,700 $ 6,400 2021 $ 2,600 3,500 $6,100 a. Assume that the dividend payout ratio is fixed at 50% and the equity-to-asset ratio is fixed at two-thirds. What is the internal growth rate for 2023? b. What is the sustainable growth rate for 2023? Note: For all requirements, do not round intermediate calculations. Enter your answers 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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Transcribed Image Text:The financial statements of Eagle Sport Supply are shown in the table below. For simplicity, "Costs" include interest. Assume that
Eagle's assets are proportional to its sales. Assume a growth rate of 35% in revenue, expenses, and assets in 2023. The tax rate will
remain constant.
Sales
Income Statement
Costs
$ 4,350
1,950
Pretax income
Taxes (at 30.0%)
$ 2,400
720
Net income
$ 1,680
2022
Balance Sheet, Year-End
2021
Net assets
$ 6,400 $ 6,100
Total
$ 6,400
$ 6,100
Debt
Equity
Total
2022
$ 2,700
3,700
2021
$ 2,600
3,500
$ 6,400
$ 6,100
a. Assume that the dividend payout ratio is fixed at 50% and the equity-to-asset ratio is fixed at two-thirds. What is the internal
growth rate for 2023?
b. What is the sustainable growth rate for 2023?
Note: For all requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
a. Internal growth rate
b. Sustainable growth rate
%
%
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