The financial statements of Eagle Sport Supply are shown in the table below. For simplicity, "Costs" include interest. Assume that Eagle's assets are proportional to its sales. Assume a growth rate of 30% in revenue, expenses, and assets in 2023. The tax rate will remain constant. Income Statement Sales Costs $ 3,350 1,450 Pretax income Taxes (at 40.0%) $ 1,900 760 Net income $ 1,140 2022 Balance Sheet, Year-End 2021 Net assets $ 5,400 $ 5,100 Total $ 5,400 $ 5,100 Debt Equity Total 2022 $ 2,200 3,200 2021 $ 2,100 3,000 $ 5,400 $ 5,100 a. Assume that the dividend payout ratio is fixed at 50% and the equity-to-asset ratio is fixed at two-thirds. What is the internal growth rate for 2023? b. What is the sustainable growth rate for 2023?
The financial statements of Eagle Sport Supply are shown in the table below. For simplicity, "Costs" include interest. Assume that Eagle's assets are proportional to its sales. Assume a growth rate of 30% in revenue, expenses, and assets in 2023. The tax rate will remain constant. Income Statement Sales Costs $ 3,350 1,450 Pretax income Taxes (at 40.0%) $ 1,900 760 Net income $ 1,140 2022 Balance Sheet, Year-End 2021 Net assets $ 5,400 $ 5,100 Total $ 5,400 $ 5,100 Debt Equity Total 2022 $ 2,200 3,200 2021 $ 2,100 3,000 $ 5,400 $ 5,100 a. Assume that the dividend payout ratio is fixed at 50% and the equity-to-asset ratio is fixed at two-thirds. What is the internal growth rate for 2023? b. What is the sustainable growth rate for 2023?
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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Transcribed Image Text:The financial statements of Eagle Sport Supply are shown in the table below. For simplicity, "Costs" include interest.
Assume that Eagle's assets are proportional to its sales. Assume a growth rate of 30% in revenue, expenses, and assets in
2023. The tax rate will remain constant.
Sales
Costs
Income Statement
$ 3,350
1,450
Pretax income
Taxes (at 40.0%)
$ 1,900
760
Net income
$ 1,140
Balance Sheet, Year-End
2022
2021
2022
Net assets
$ 5,400
$ 5,100
Total
$ 5,400 $ 5,100
Debt
Equity
Total
$ 2,200
3,200
$ 5,400
2021
$ 2,100
3,000
$ 5,100
a. Assume that the dividend payout ratio is fixed at 50% and the equity-to-asset ratio is fixed at two-thirds. What is the
internal growth rate for 2023?
b. What is the sustainable growth rate for 2023?
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