Problem 4-18 Growth and Profit Margin [LO3] Gamgee Company wishes to maintain a growth rate of 11.8 percent per year, a debt- equity ratio of 1.7, and a dividend payout ratio of 20 percent. The ratio of total assets to sales is constant at 89. What profit margin must the firm achieve? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Profit margin %

Problem 4-18 Growth and Profit Margin [LO3] Gamgee Company wishes to maintain a growth rate of 11.8 percent per year, a debt- equity ratio of 1.7, and a dividend payout ratio of 20 percent. The ratio of total assets to sales is constant at 89. What profit margin must the firm achieve? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Profit margin %

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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Problem 3-14 Sustainable Growth [LO 3] Assume the following ratios are constant. Total asset turnover Profit margin Equity multiplier Payout ratio = Sustainable growth rate = = = 2.28 5.6% 1.75 What is the sustainable growth rate? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. 37% %
Y9 Chapter 4 Problem 11 a. Use the information below from Tournament Sporting Goods's annual financial statements to calculate the actual and sustainable growth rate for each year from 2014 to 2017. b. Do you think Tournament Sporting Goods is having a problem financing its growth? Is the increase in dividends a good idea for the company? TOURNAMENT SPORTING GOODS FINANCIAL DATA ($ thousands) 2013 2014 2015 2016 2017 Sales 491.62 706.52 792.01 876.52 1,088.46 Net income 43.27 26.31 38.48 44.84 25.76 Total assets 477.06 648.42 664.26 697.16 982.63 Equity 346.32 426.01 465.85 432.91 553.27 Dividends 0.00 0.00 0.80 1.65 2.22
Question 9: • Problem • Amazon Co, Inc (AMZN) has an Enterprise Value of $18.7 billion. • AMZN’s Enterprise Value to Sales ratio is 0.40 versus 1.65 for peers, while their Enterprise Value to EBITDA ratio is 6.5 versus 15.7 for peers. • How would AMZN’s Enterprise Value change if the ratios were equal to the average of its peers?
Problem 3-10 Sustainable Growth Rate The Iron River Company has an ROE of 14.6 percent and a payout ratio of 30 percent. What is the company’s sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Problem 4-12 Internal Growth [LO3] Fairlane Company. has an ROA of 12 percent and a payout ratio of 25 percent. What is its internal growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Internal Growth Rate.
18 8 00:37:07 The most recent financial statements for Alexander Company are shown here: Income Statement Sales $ 55,000 35,200 Costs Taxable income $19,800 Taxes (22%) 4,356 Net income $ 15,444 Assets and costs are proportional to sales. The company maintains a constant 26 percent dividend payout ratio and a constant debt-equity ratio. Multiple Choice What is the maximum increase in sales that can be sustained assuming no new equity is issued? $9,905.67 $5,142.88 $3,144.45 Current assets Fixed assets Total $10,105.67 Balance Sheet $ 86,130 Long-term debt $59,400 47,520 Equity 74,250 $ $ Total 133,650 133,650 $10,005.67
Problem 7-24 Negative Growth [LO 1] You've collected the following information from your favorite financial website. Dividend PE Yield 2.6 3.8 52-Week Price LO 10.43 Acevedo .36 33.42 69.50 14.12 Manta Energy .97 20.74 Winter Sports .32 Hi 77.40 55.81 130.93 50.41 35.00 Stock (Dividend) Georgette, Incorporated 1.54 YBM 2.00 Answer is complete but not entirely correct. Required return 4,40 2.2 6.2 1.5 Ratio 6 10 10 6 28 Close Price 13.90 40.43 88.97 15.60 77 Net Change -.24 -.01 According to your research, the growth rate in dividends for Manta Energy for the previous 10 years has been negative 10 percent. If investors feel this growth rate will continue, what is the required return for the stock? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. 3.07 -.26 .18
Problem 16-3 ROE and Leverage [LO1, 2] Fujita, Incorporated, has no debt outstanding and a total market value of $408,900. Earnings before Interest and taxes, EBIT, are projected to be $54,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 13 percent higher. If there is a recession, then EBIT will be 21 percent lower. The company is considering a $200,000 debt Issue with an interest rate of 5 percent. The proceeds will be used to repurchase shares of stock. There are currently 8,700 shares outstanding. Ignore taxes for questions (a) and (b). Assume the company has a market-to-book ratio of 1.0 and the stock price remains constant. a-1. Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g.. 32.16.) a-2. Calculate the percentage changes in ROE when the economy expands or enters a…
Problem 19.20 Tomey Supply Company's financial statements for the most recent fiscal year are shown below. The company projects that sales will increase by 15 percent next year. Assume that all costs and assets increase directly with sales. The company has a constant 26 percent dividend payout ratio and has no plans to issue new equity. Any financing needed will be raised through the sale of long- term debt. Prepare pro forma financial statements for the coming year based on this information, and calculate the EFN for Tomey. (Round intermediate calculation to the nearest whole dollar, e.g. 5,275. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Tomey Supply Company Income Statement and Balance Sheet Income Statement Balance Sheet Revenues $1,768,121 Assets Costs 1,116,487 Current Assets $280,754 EBT 651,634 Net Fixed Assets 713,655 Taxes (35%) 228,072 Total assets $994,409 Net Income $423,562 Liabilities and Equity: Current…
Question 6 "Axon Industries needs to raise $250,000 USDs for a new investment project. If the firm issues 1-year debt, it may have to pay an interest rate of 15%, although Axon's managers believe that 8.5% would be a fair rate given the level of risk. If the firm issues equity, they believe the equity may be underpriced by 11%.What is the cost (in USDs) to current shareholders of financing the project out of equity? Note: Express your answers in strictly numerical terms. For example, if the answer is $500
Problem 4-13 Sustainable Growth [LO3] Premier Corporation has an ROE of 14 percent and a payout ratio of 22 percent. What is its sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Sustainable growth rate %
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