Problem 4-7 Calculating Sustainable Growth [LO3]The most recent financial statements for Mandy Company are shown here:Income StatementBalance Sheet$ 11,760 Debt27,450Equity$ 39,210SalesCostsTaxable incomeTaxes (24%)Net income$19,20013,050$ 6,1501,476$ 4,674Current assetsFixed assetsTotalTotal$ 15,88023,330$ 39,210Assets and costs are proportional to sales. Debt and equity are not. The companymaintains a constant 45 percent dividend payout ratio. What is the sustainable growthrate? (Do not round intermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)

Solution:- Sustainable growth rate means the rate at which the entity will grow in future. It is…

Problem 4-7 Calculating Sustainable Growth [LO3] The most recent financial statements for Mandy Company are shown here: Income Statement Balance Sheet $11,760 Debt 27,450 Equity Sales Costs Taxable income Taxes (24%) Net income $19,200 Current assets 13,050 Fixed assets $ 6,150 1,476 $4,674 Total $ 39,210 $15,880 23,330 Total $ 39,210 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 45 percent dividend payout ratio. What is the 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 4-7 Calculating Sustainable Growth [LO3] The most recent financial statements for Mandy Company are shown here: Income Statement Balance Sheet $11,760 Debt 27,450 Equity Sales Costs Taxable income Taxes (24%) Net income $19,200 Current assets 13,050 Fixed assets $ 6,150 1,476 $4,674 Total $ 39,210 $15,880 23,330 Total $ 39,210 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 45 percent dividend payout ratio. What is the sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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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Income Statement Balance Sheet Sales $ 29,300 Assets $ 22,500 Debt $ 6,000 Costs 22,870 Equity 16,500 Net income $ 6,430 Total $ 22,500 Total $ 22,500 The company has predicted a sales increase of 6 percent. Assume the company pays out half of net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not. Prepare the pro forma statements. (Input all amounts as positive values. Do not round intermediate calculations and round your answers to the nearest whole dollar amount.) Pro forma income statement Pro forma balance sheet Sales Assets Debt Costs Equity Net income Total Total What is the external financing needed?
11.4Calculate financial leverage measures The following information was available for the year ended December 31, 2016:Earnings before interest and taxes (operating income)$120,000Interest expense 20,000Income tax expense 30,000Net income 70,000Total assets at year-end 400,000Total liabilities at year-end 240,000Required:Calculate the debt ratio at December 31, 2016.Calculate the debt/equity ratio at December 31, 2016.Calculate the times interest earned for the year ended December 31, 2016.
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Trend Analysis Critelli Company has provided the following comparative information: Year 5 Year 4 Year 3 Year 2 Year 1 Net income $940,300 $810,600 $681,200 $582,200 $493,400 Interest expense 319,700 291,800 252,000 192,100 153,000 Income tax expense 300,896 226,968 190,736 151,372 118,416 Average total assets 5,779,817 5,103,704 4,360,748 3,704,785 3,153,171 Average stockholders' equity 1,975,420 1,769,869 1,548,182 1,373,113 1,203,415 You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years: Industry Ratios Return on total assets 21.5 % Return on stockholders’ equity 44.4 % Times interest earned 4.6 Instructions: Calculate three ratios for Year 1 through Year 5. Round to one decimal place. a. Return on total assets: Year 5…
Profit margin Capital intensity ratio Debt-equity ratio Net income Dividends 8.8% 49 64 -$99,000 $46,000 Based on the above information, calculate the sustainable growth rate for Northern Lights Co. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.32.16) Sustainable growth a
Solvency and Profitability Trend Analysis Addai Company has provided the following comparative information: 20Υ8 20Y7 20Υ6 20Y5 20Υ4 Net income $273,406 $367,976 $631,176 $884,000 $800,000 Interest expense 616,047 572,003 528,165 495,000 440,000 Income tax expense 31,749 53,560 106,720 160,000 200,000 Total assets (ending balance) 4,417,178 4,124,350 3,732,443 3,338,500 2,750,000 Total stockholders' equity (ending balance) 3,706,557 3,433,152 3,065,176 2,434,000 1,550,000 Average total assets 4,270,764 3,928,396 3,535,472 3,044,250 2,475,000 Average total stockholders' equity 3,569,855 3,249,164 2,749,588 1,992,000 1,150,000 You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years: 20Υ4-2ΟY8 Return on total assets 28% Return on stockholders' equity 18% Times interest earned 2.7 Ratio of liabilities to stockholders' equity 0.4 Required: 1.…
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Based on the forecast how much additional financing is needed?
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Metropolitan Republic Return on Assets 19.96% 8.98% Profit Margin 15.45% 5.51% Asset Turnover 1.29 1.63 Return on Equity 52.73% 32.66% Equity Multiplier 2.64 3.64 Acid-Test Ratio 0.50 0.22 Current Ratio 0.99 0.85 Inventory Turnover 5.23 6.27 Times Interest Earned 18.49 15.49 Please answer Question 2: Evaluate and compare two companies
Company Comparison Tesla GM Ford Toyota Current Ratio 1.24 1.07 1.16 1.04 Total asset 0.77 0.60 0.60 0.59 turnover ratio Debt ratio 0.80 0.81 1.92 4.83 Gross profit 16.55% 10.18% 13.60% 10.01% margin P/E ratio N/A 8.15 N/A 7.81 The company with the best debt ratio, P/E ratio, and total asset turnover ratio is: Select one: O a. GM O b. Ford ○ c. Toyota O d. Tesla

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