Here are the abbreviated financial statements for Planner’s Peanuts: INCOME STATEMENT, 2019 Sales $ 3,500 Cost 2,700 Net income $ 800 BALANCE SHEET, YEAR-END 2018 2019 2018 2019 Assets $ 4,500 $ 5,000 Debt $ 833 $ 1,000 Equity 3,667 4,000 Total $ 4,500 $ 5,000 Total $ 4,500 $ 5,000 Assume the payout ratio is 50%. a. Calculate the internal growth rate where no external debt or equity is to be issued. (Do not round intermediate calculations. Enter your answer as a whole percent.) b. Calculate the sustainable growth rate where the firm maintains a fixed debt ratio but issues no equity. (Do not round intermediate calculations. Enter your answer as a whole percent.)
Here are the abbreviated financial statements for Planner’s Peanuts: INCOME STATEMENT, 2019 Sales $ 3,500 Cost 2,700 Net income $ 800 BALANCE SHEET, YEAR-END 2018 2019 2018 2019 Assets $ 4,500 $ 5,000 Debt $ 833 $ 1,000 Equity 3,667 4,000 Total $ 4,500 $ 5,000 Total $ 4,500 $ 5,000 Assume the payout ratio is 50%. a. Calculate the internal growth rate where no external debt or equity is to be issued. (Do not round intermediate calculations. Enter your answer as a whole percent.) b. Calculate the sustainable growth rate where the firm maintains a fixed debt ratio but issues no equity. (Do not round intermediate calculations. Enter your answer as a whole percent.)
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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Here are the abbreviated financial statements for Planner’s Peanuts:
| INCOME STATEMENT, 2019 | |||
| Sales | $ | 3,500 | |
| Cost | 2,700 | ||
| Net income | $ | 800 | |
| BALANCE SHEET, YEAR-END | |||||||||||||||||||
| 2018 | 2019 | 2018 | 2019 | ||||||||||||||||
| Assets | $ | 4,500 | $ | 5,000 | Debt | $ | 833 | $ | 1,000 | ||||||||||
| Equity | 3,667 | 4,000 | |||||||||||||||||
| Total | $ | 4,500 | $ | 5,000 | Total | $ | 4,500 | $ | 5,000 | ||||||||||
Assume the payout ratio is 50%.
a. Calculate the internal growth rate where no external debt or equity is to be issued. (Do not round intermediate calculations. Enter your answer as a whole percent.)
b. Calculate the sustainable growth rate where the firm maintains a fixed debt ratio but issues no equity. (Do not round intermediate calculations. Enter your answer as a whole percent.)
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