Jasmine Manufacturing wishes to maintain a sustainable growth rate of 9.25 percent a year, a debt-equity ratio of .50, and a dividend payout ratio of 27.5 percent. The ratio of total assets to sales is constant at 1.25. What profit margin must the firm achieve in order to meet its growth rate goal?

Jasmine Manufacturing wishes to maintain a sustainable growth rate of 9.25 percent a year, a debt-equity ratio of .50, and a dividend payout ratio of 27.5 percent. The ratio of total assets to sales is constant at 1.25. What profit margin must the firm achieve in order to meet its growth rate goal?

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

See similar textbooks

Related questions

Q: years, after which growth should match the 5.80% industry average growth rate, which is a more…

A: Year 1 dividend = 1.41 (1 + 12.4%) = 1.58484 Year 2 dividend = 1.58484 (1 + 12.4%) = 1.78136Year 3…

Q: A. Complete the Year 2 income statement data for Green Caterpillar, then answer the questions that…

A: One of a company's fundamental financial statements, the income statement exhibits the company's…

Q: Earnings in the most recently concluded fiscal year were $6.28. The company will retain all its…

A: Information Provided: Earnings = $6.28 Return on new investment = 44% Retain = 85% (t1 - t2) Return…

Q: which one is correct please suggest? QUESTION 39 Getrag expects its sales to increase 20% next year…

A: Firm needs funds to start the new projects or expand the existing one. Requirement of the funds…

Q: Firm B has a capital intensity ratio of 2,optimal debt equity ratio of 1.5, and dividend payout…

Q: Boyd Crowder's Chowder, Inc. desires a sustainable growth rate of 25.4 percent while maintaining a…

A: As per DuPont analysis, the ROE can be found by multiplying the value of the equity multiplier along…

Q: (Measuring growth) Given that a firm's return on equity is 14 percent and management plans to retain…

A: The growth rate of a firm can be determined by multiplying its return on equity (ROE) by the…

Q: ARN has come out with a new and improved product. As a result, the firm projects an ROE of 25%, and…

A: Present value of growth opportunity is a valuation techniques which determines the price of the…

Q: Consider a retail firm with a net profit margin of 3.93 %, a total asset turnover of 1.87, total…

A: The objective of the question is to calculate the Return on Equity (ROE) for a retail firm under…

Q: Consider the following scenario: Green Caterpillar Garden Supplies Inc.'s Income statement reports…

A: Income statement is the systematic representation of operating and financial data that helps to…

Q: Walmart wants to achieve a sustainable growth rate of 3.63% and it wants to keep a same dividend…

A: The sustainable growth rate refers to the measure of the company's financial stability as it…

Q: ABC Inc. is a juice producer which has been growing steadily for the past 5 years. According to the…

A: The time value of money is the concept that dictates the worth of $1 of money of today is more than…

Q: Assignment Answer the following questions about the scenario presented above. Answers should be…

A: Income Statement : It is a part of financial statement of a company in which revenue and expenses…

Q: you own a factory and you are happy to see that earning per share have increased from $1 to $2 over…

A: Using excel RATE function

Q: A firm has $60 million in equity and $40 million of debt, it pays dividends of 20% of net income,…

A: Equity=$60 million Debt=$40 million Net Income=$20 million Dividend=20% Required: Sustainable Growth…

Q: on the pro forma income statement sales are expected to increase by 23%. If the net margin is…

A: Profit margin is calculated as (Net profit / Sales) * 100.However, in the present question, the net…

Q: Need Answer

A: Step 1: Introduction to Equity Multiplier:The equity multiplier is the ratio of the total assets…

Q: Local Produce a company selling locally sourced food products had net income of $6,000 on sales of…

A: Sustainable growth rate is defined as the growth rate that is maximum, which has the company or…

Q: What is the sustalnable growth rate for a firm with net income of $2.5 million, cash dividends of…

A: Sustainable Growth Rate = Retention Ratio * Return on equity Retention Ratio = Retention Amount /…

Q: A company expects a 20% return on equity invested entirely in new projects. The company's management…

A: Return on equity = 20%Retention ratio =30%Earnings per share = €3Expected return = 12%

Q: A firm wishes to maintain an sustainable growth rate of 12 percent and a dividend payout ratio of 50…

A: ROE provides investors with valuable insights into a company's profitability, management…

Q: Determine the value of the External money needed for next year. 2. What would be the impact on ROE…

A: Sales in the next year will increase by 15% and the current assets, fixed assets and current…

Q: what is the firm's internal growth rate (IGR) if ROA is 14.5%, ROE is 18.8%, the firm retains 65% of…

A: Internal growth rate can be calculated from return on assets and retention ratio.

Q: our company has just successfully completed some work that leads you to expect that its earnings and…

A: In this we have to calculate present value of dividend and intrinsic value of stock.

Q: An unlevered firm perceives its optimal dividend policy to be a 40 percent payout ratio. Asset…

A: Sustainable growth rate= Asset turnover* Profit margin * (1- dividend payout ratio) = 80%*10%*60% =…

Q: The Green Giant has a 7 percent profit margin and a 61 percent dividend payout ratio. The total…

A: The term "sustainable rate of growth" refers to the rate at which a business can expand without…

Q: Greshak Ltd. forecasts its long-term sustainable growth rate to be 4.0%. If the firm's required rate…

A: Given details are : Sustainable growth rate (g) = 4% = 0.04 Required rate of return (r) = 12% = 0.12…

Q: Need help with this Question

A: Sustainable growth rate = ROE*b/[1-(ROE*b)].095 = ROE * .70/[1-(ROE*.70)].095 =ROE*.70 /[1…

Q: A firm wishes to maintain an sustainable growth rate of 10 percent and a dividend payout ratio of 56…

A: The Sustainable Growth Rate (SGR) is a measure used in finance and business to determine the maximum…

Q: A firm wishes to maintain an sustainable growth rate of 9 percent and a dividend payout ratio of 64…

A: Debt-equity ratio evaluates how much debt and equity a company uses to finance its operations and…

Q: Give me the answer

A: Step 1: Question 1: Growth and Profit Margin - Dante Co. Given:Desired growth rate (g) = 12% or…

Q: A company projects a rate of return of 20% on new projects. The executive team plan to plow back 20%…

A: A company projects a rate of return of 20% on new projects. The executive team plan to plow back 20%…

Q: Consider the following scenario: Blue Hamster Manufacturing Inc.'s income statement reports data for…

A: As per Bartleby policy in case of multiple sub parts only first three subpart can be answered. So…

Q: Question: Growth and Profit Margin - Dante Co. wishes to maintain a growth rate of 12 percent per…

A: Growth and Profit Margin for Dante Co. To find the required profit margin for Dante Co., we need to…

Q: What is the cash cow value and the value of its growth opportunities (NPVGO) if a corporation has…

A: Cash Cow Value (CCV): This represents the value of the firm's existing operations if it never takes…

Q: I want to answer the question

A: The sustainable growth rate is given by:SGR =ROE×bwhere b is the retention ratio (also known as the…

Q: OnTheMove Inc. has profit margin of 9%, total asset turnover of 1.5, equity multiplier of 2 and a…

A: Sustainable growth rate is the maximum growth rate that a company can sustain without having to…

Q: A) Obtain the EFN if the firm plans to have sales growth equal to 20% B) Use your fianncial model to…

A: Step 2⟶b) Estimate the internal growth rate using the financial model:YearSalesNet IncomeRetained…

Q: If A7X Company has an ROA of 14 percent and a payout ratio of 16 percent, what is its internal…

A: An internal growth rate for a public company is calculated by first using the return on assets…

Q: The most recent finical statements for Moose Tours, Inc., appear below. Sales for 2016 are projected…

A: Income statement: The income statement determines the net income of the business by subtracting the…

Q: Suppose the growth rate of a firm's profits is 5%, the interest rate is 6%, and the current profits…

A: Given details are : Current profits of firm = $100 million Growth rate = 5% Interest rate = 6% From…

Q: In this exercise, we develop a model for the growth rate G, in thousands of dollars per year, in…

A: We have to use the conditions and the example given in the problem to answer the question.

Q: iscal year were $$6.286.28. The company will retain all its earnings this year (from t=00 to t=11 ),…

A: a EPS0 = $6.86Growth rate = ROE x Retention ratio = 43% x 100% = 43% EPS1 = 6.86 x 1.43 =…

Q: The profit margin is 15% and the dividend payout is 70%. Last year sales were RO 100 million and…

A: Financing is one of important financial decision for firm. To start up new activities or projects…

Question

What profit margin must the firm achieve in order to meet its growth rate goal?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1 Analysis

VIEW

Step 2 Calculation of ROE

VIEW

Step 3 Calculation of profit margin

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

Consider a retail firm with a net profit margin of 3.15%, a total asset turnover of 1.82, total assets of $44.9 million, and a book value of equity of $17.4 million. c. If, in addition, the firm increased its revenues by 16% (maintaining this higher profit margin and without changing its assets or liabilities), what would be its ROE?
Your company has just successfully completed some R&D work that leads you to expect that its earnings and dividends will grow at a rate of 43.50% this year, 24.50% next year, after which growth should match the 6.00% industry average growth rate, which is a more sustainable rate. The last dividend paid (D0) was $1.40 and your firm's WACC is 12.54%. What is the value per share of your firm's stock?
YiYu Manufacturer wishes to maintain a growth rate of 6 percent a year, a debt-equity ratio of 0.45, and a dividend payout ratio of 30 percent. The ratio of total assets to sales is constant at 1.25. Calculate the profit margin the firm must achieve.
Frasier Cabinets wants to maintain a growth rate of 5 percent without incurring any additional equity financing. The firm maintains a constant debt-equity ratio of 0.55, a total asset turnover ratio of 1.30, and a profit margin of 9.0 percent. What must the dividend payout ratio be? HINT: Determine if the target growth rate is IGR/SGR. Next, use the formula to determine how much money (%) the firm can afford to payout to stockholders. You will also want to review the DuPont identity. Multiple Choice 26.26 percent 38.87 percent 49.29 percent 6113 percent 73,74 percent
The ROA of your firm is 5%. The firm also has a debt-asset ratio of 70%. If your firm reinvests 100% of its earnings, at what rate can your assets grow without having to change your capital structure? Further, at what rate can your assets grow without having to raise capital externally? I know the formula for sustainable growth is ROE x b / 1 - ROE x b Internal growth ROA x 1 - b / 1 - (ROA x 1- b) But I do not know how to get the information with what is provided. I think I'm missing a formula to go from ROA (which is the 5% provided) to ROE. Can you show me how to solve this problem? Thank you in advance for your help.
Loreto Inc. has the following financial ratios: asset turnover = 2.40; net profit margin (i.e., net income/sales) = 5%; payout ratio = 30%; equity/assets = 0.40. a. What is Loreto's sustainable growth rate? b. What is its internal growth rate?
(Measuring growth) Thomas, Inc.'s return on equity is 14 percent and management has plans to retain 23 percent of earnings for investment in the company. a. What will be the company's growth rate? b. How would the growth rate change if management (i) increased retained earnings to 32 percent or (ii) decreased retention to 13 percent?
A firm in the IT sector is considering how to set its dividend policy. It has a capital budget of €3,000. The company wants to maintain a target capital structure that is 15% debt and 85% equity. The company forecasts that its net income this year will be €3,500. If the company follows a residual dividend policy, what will be its total dividend payment and its payout ratio? Dividends = Net income – [(target equity ratio) *(total capital budget)].
Based on the following information, calculate the sustainable growth rate for Kaleb's Heavy Equipment: Profit margin Capital intensity ratio Debt-equity ratio Net income Dividends 8.1% .51 .67 $ 29,000 $19,720
A firm wants a sustainable growth rate of 2.73 percent while maintaining a dividend payout ratio of 39 percent and a profit margin of 6 percent. The firm has a capital intensity ratio of 2. What is the debt-equity ratio that is required to achieve the firm's desired rate of growth?
The Crash Davis Driving School has an ROE of 15.3 percent and a payout ratio of 52 percent. What is its sustainable growth rate?
A firm wants a sustainable growth rate of 3.13 percent while maintaining a dividend payout ratio of 27 percent and a profit margin of 6 percent. The firm has a capital intensity ratio of 2. What is the debt-equity ratio that is required to achieve the firm's desired rate of growth? Multiple Choice O OO OO 69 times 61 times 73 times 20 times 39 times

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS