Metro Credit Union is forecasting areturn on equity of 12 percent for thisyear. The board of directors wants tomaintain its current policy of paying outdividends that amount to 20% of any netearnings the credit union earns. Howquickly can Metro Credit Union's assetsgrow this year without jeopardizing itscapital to assets ratio?(A) 12 percent(B) 9.3 percent(C) 9.6 percent(D) 6 percent

To determine the growth rate of Metro Credit Union's assets without jeopardizing its capital to…

Answered: Metro Credit Union is forecasting a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Puckett Products is planning for $3 million in capital expenditures next year. Puckett's target capital structure consists of 60% debt and 40% equity. If net income next year is $2 million and Puckett follows a residual distribution policy with all distributions as dividends, what will be its dividend payout ratio? Round your answer to two decimal places.
Neil Young Brothers maintains a constant debt-equity ratio. There are 50,000 shares of stock outstanding at a market price of $24.50 a share. There are 2,500 bonds outstanding selling for $980. Projected earnings for next year are estimated at $600,000. The managers expect to make $450,000 investments in new projects in the coming year. How much debt financing will the firm need next year if it follows a residual dividend policy?Question 2 options: $300,000 $450,000 $500,000 $600,000 $0
Derry Corporation is expected to have an EBIT of $1,900,000 next year. Increases in depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $80,000, and $120,000, respectively. All are expected to grow at 15 percent per year for four years. The company currently has $10,000,000 in debt and 800,000 shares outstanding. At Year 5, you believe that the company's sales will be $13,620,000 and the appropriate price-sales ratio is 2.1. The company's WACC is 8.4. percent and the tax rate is 21 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price
The sales revenue of Business Strategy Limited for 2019 is $100 million. The CEO told the sales director in December of 2019 that the board had set a target of $145 million in sales revenue for 2022 and expected that there should be stable annual growth of sales over the 3 years. The board expects the growth rate will be maintained continuously in future years. The market has the same expectation of the board. Business Strategy Limited is expected to pay dividend of $20 per common stock at the end of the year 2020. The market price of the common stock at the beginning of 2020 is $1,000.What is the required rate of return on Business Strategy Limited’s common stock?
Gardial GreenLights, a manufacturer of energy-efficient lighting solutions, has had such success with its new products that it is planning to substantially expand its manufacturing capacity with a $10 million investment in new machinery. Gardial plans to maintain its current 20% debt-to-total-assets ratio for its capital structure and to maintain its dividend policy in which at the end of each year it distributes 35% of the year's net income. This year's net income was $8 million. How much external equity must Gardial seek now to expand as planned? Enter your answer in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answer to two decimal places. million $
Leon Inc. has the following capital structure, which it considers to be optimal: Debt 25% Preferred stock 15 Common equity 60 Leon’s expected net income this year is $34,285.72, its established dividend payout ratio is 30%, its federal-plus-state tax rate is 25%, and investors expect future earnings and dividends to grow at a constant rate of 9%. Leon paid a dividend of $3.60 per share last year, and its stock currently sells for $54.00 per share. Leon can obtain new capital in the following ways: New preferred stock with a dividend of $11.00 can be sold to the public at a price of $95.00 per share. Debt can be sold at an interest rate of 12%. Leon has the following investment opportunities that are average-risk projects: Project Cost at t=0 Rate of Return A $10,000 17.4% B 20,000 16.0 C 10,000 14.2 D 20,000 13.2 E 10,000 12.0 Calculate the Retained earnings breakpoint. Assume that Leon does not want to issue any new common stock.
Company JA Prestwood had a net income of $1,000,000 this year. Next year's total capital budget is $2,600,000. If the target capital structure is 47% debt and the rest equity, what will be this year's dividend payout ratio?
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