Income Statement Sales Costs Pretax income Taxes (at 30.0%) Net income $ 4,550 2,050 $2,500 750 $ 1,750 Balance Sheet, Year-End Net assets 2022 $ 6,600 2021 $6,300 2022 Total $ 6,600 $6,300 Debt Equity Total $ 2,800 3,800 2021 $ 2,700 $ 6,600 3,600 $6,300 a. Assume that the dividend payout ratio is fixed at 60% 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?
Income Statement Sales Costs Pretax income Taxes (at 30.0%) Net income $ 4,550 2,050 $2,500 750 $ 1,750 Balance Sheet, Year-End Net assets 2022 $ 6,600 2021 $6,300 2022 Total $ 6,600 $6,300 Debt Equity Total $ 2,800 3,800 2021 $ 2,700 $ 6,600 3,600 $6,300 a. Assume that the dividend payout ratio is fixed at 60% 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?
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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A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
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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 30% in revenue, expenses, and assets in 2023. The tax rate will
remain constant.
Income Statement
Sales
Costs
$ 4,550
2,050
Pretax income
Taxes (at 30.0%)
$ 2,500
750
Net income
$ 1,750
Balance Sheet, Year-End
2022
Net assets
$ 6,600
2021
$ 6,300
Total
$ 6,600
$ 6,300
Debt
Equity
Total
2022
$ 2,800
3,800
2021
$ 2,700
3,600
$ 6,600
$ 6,300
a. Assume that the dividend payout ratio is fixed at 60% 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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