Local Produce a company selling locally sourced food products had net income of $6,000 on sales of $150,000 last year. The firm paid a dividend of $2000. Total assets at the end of last year were $400,000, of which $100,000 was financed by debt. What is the firm’s sustainable growth rate? If the firm grows at its sustainable growth rate, how much debt will have to be raised in the coming year? Confirm that the firm maintains its current debt/asset ratio. What would be the maximum possible growth rate if the firm did not sell any new debt or equity in the coming year?
Local Produce a company selling locally sourced food products had net income of $6,000 on sales of $150,000 last year. The firm paid a dividend of $2000. Total assets at the end of last year were $400,000, of which $100,000 was financed by debt. What is the firm’s sustainable growth rate? If the firm grows at its sustainable growth rate, how much debt will have to be raised in the coming year? Confirm that the firm maintains its current debt/asset ratio. What would be the maximum possible growth rate if the firm did not sell any new debt or equity in the coming year?
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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Local Produce a company selling locally sourced food products had net income of $6,000 on sales of $150,000 last year. The firm paid a dividend of $2000. Total assets at the end of last year were $400,000, of which $100,000 was financed by debt.
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- What is the firm’s sustainable growth rate?
- If the firm grows at its sustainable growth rate, how much debt will have to be raised in the coming year? Confirm that the firm maintains its current debt/asset ratio.
- What would be the maximum possible growth rate if the firm did not sell any new debt or equity in the coming year?
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