Your firm has an ROE of 12.1%, a payout ratio of 21%, $581,200 of stockholders' equity, and $366,400 of debt. If you grow at your sustainable growth rate this year, how much additional debt will you need to issue? The sustainable growth rate is %. (Round to three decimal place.)

Your firm has an ROE of 12.1%, a payout ratio of 21%, $581,200 of stockholders' equity, and $366,400 of debt. If you grow at your sustainable growth rate this year, how much additional debt will you need to issue? The sustainable growth rate is %. (Round to three decimal place.)

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

See similar textbooks

Related questions

Q: ABC Corporation is experiencing rapid growth. Dividends are expected to grow at 25% per year for the…

A: The question is based on the concept of Financial Accounting.

Q: company will earn $3 per share next year and should be able to pay 25% as dividend. the company is…

A: Value of stock can be found as the present value of dividends and present value of growth in…

Q: A firm is expected to pay $1,6 dividend per share next year. The dividend is expected to grow at a…

A: Computation of today’s stock price:

Q: A firm's current stock price is $42. You expect the firm to pay $1.25 worth of dividends next year…

A: Cost of Equity is the return which an investors expected to receive from the investments made in the…

Q: Calculate the value of the company

A: An asset is valued via discounted value of cash flows. In the same way value of equity shares of…

Q: Suppose that a firm's recent earnings per share and dividend per share are $2.50 and $1.00,…

A: Current Dividend per Share = d0 = $1Growth Rate = g = 5%Required Rate of Return = r = 10%

Q: An all-equity-financed firm plans to grow at an annual rate of at least 28%. Its return on equity is…

A: The question is based on the concept of sustainable growth rate of a firm , which can be establish…

Q: Your company paid a dividend of $2 last year. The growth rate is expected to be 20 percent for 1…

A: Current dividend (D0) = $2 Growth rate for year 1 = 20% Growth rate for year 2 = 17% Growth rate…

Q: The 5-year average P/E ratio for a firm is 20.00. This year 's earning per share is $5.00 and it is…

A: Financial management consists of directing, planning, organizing and controlling of financial…

Q: Sidman Products's common stock currently sells for $64 a share. The firm is expected to earn $7.04…

A: Expected growth rate is 4.10% Next year EPS is 6.30Explanation:Part A:Current Stock Price = D1/(ke -…

Q: The Data General Company is expected to pay an annual dividend of $2.53 at the end of the year.…

A: Computation of required rate of return:Required rate of return is 15.81%.Excel spread sheet:

Q: . Using PROBLEM 2, what is the projected growth rate for the 10-year period? (Round off to 2 decimal…

A: Growth Rate: It is the rate at which the cash flows of the investment grow each year.…

Q: I need help with this problem and how to set it up in excel with formulas.

A: a) Since dividends are paid quarterly and both the growth rate and required rate of return are…

Q: ARN has come out with a new and improved product. As a result, the firm projects an ROE of 25%, and…

A: Present value of growth opportunity is a valuation techniques which determines the price of the…

Q: Your firm has an ROE of 12.1%, a payout ratio of 21%, $632,800 of stockholders' equity, and $425,900…

A: Sustainable growth rate is the growth rate at which a company can grow if its current capital…

Q: IBM expects to pay a dividend of $6 next year and expects these dividends to grow at 3.92% a year.…

A: Cost of equity by dividend growth model: Cost of equity = D1/P0 + g D1 is expected dividend P0 is…

Q: Brandt Enterprises is expecting rapid growth for the next 2 years. They JUST PAID divident (D0) of…

A: Hence, Dividend after year 1 (D1) is 1.875, which is determined by multiplying the initial dividend…

Q: Pharoah Inc., is expected to grow at a rate of 20.000 percent for the next five years and then…

A: Super normal growth = 20% Constant Growth = 12% Dividend Paid = 2.35 Required Return = 17%…

Q: Madrigal Inc. paid a $2 last year, and the stock is currently selling for $87. If investors require…

A: The process that ascertains the market worth of an entity's share is regarded as stock valuation.…

Q: enentech is expecting both earnings and dividends to grow by 15% in Year 1, 0% in Year 2, by 5% in…

A: Given:D1=P0×(r−g)Po = $288r=15% (0.15 as a decimal)g=15% for Year 1D1=P0×(r−g)

Q: A firm plans to grow at an annual rate of at least 13%. Its return on equity is 21%. Suppose the…

Q: Parvis Inc. wants to calculate its cost of equity. The company paid a dividend of $0.40 this year…

A: Cost of equity represents the required rate of return of the firm for raising the equity capital.

Q: For the next fiscal year, you forecast net income of $51,900 and ending assets of $508,000. Your…

A: Obtaining money or capital to support different financial operations, investments, or initiatives is…

Q: Wesen Corp. will pay a dividend of $3.50 next year. The company has stated that it will maintain a…

A: In the given question we need to calculate the price we will pay for the stock i.e. Intrinsic value…

Q: BM expects to pay a dividend of $8 next year and expects these dividends to grow at 3.15% a year.…

A: IBM Share Price = Dividend Next Year / (Cost of Equity - Growth Rate)

Q: the dividend yield and capital gain yield over the first year?

A: Information Provided: Dividend growth rate = 5% Next Dividend = $3.50 Required return = 13%

Q: The Bank of America is considering its dividend policy. It can either choose to pay a total dividend…

A: Value of Stock = Present value of cash flows Required return is 15% per annum i.e 3.75% per quarter

Q: the next fiscal year, you forecast net income of $51,100 and ending assets of $506,900. Your firm's…

A: The debt-equity ratio helps to determine the amount of leverage in the company compared to the…

Q: Universal Exports is expected to pay the following dividends over the next four years: $8, $4, $2,…

A: Using Dividend Discount Model

Q: For the next fiscal year, you forecast net income of $52,000 and ending assets of $503,400. Your…

A: The Ending Assets = $503,400. Therefore ending liabilities = $503,400. Retained Earing's = Net…

Q: A company projects a rate of return of 20% on new projects. Management plans to plow back 20% of all…

A: Since more than three parts are asked at a time, the answer for first three sub-parts is only…

Q: Calculate the Present Value of Growth Opportunities (PVGO) Medtronic is expected to earn $5.72 next…

Q: Spencer Supplies’s stock is currently selling for $60 a share. The firm is expected to earn $5.40…

A: Given: Price of stock = $60 Dividend = $3.60 Required return =9% = 0.09

Q: , what is the present value of its growth opportunities?

A: Earnings per share, E = $12Plowback Ratio, b = 60%Dividend Payout Ratio = 100 – Plowback Ratio = 100…

Q: For the next fiscal year, you forecast net income of $ 50, 700 and ending assets $500, 300. Your…

A: Net financing needs:Net finance needs are the difference between a company's total cash outflows…

Q: An all-equity-financed firm plans to grow at an annual rate of at least 24%. Its return on equity is…

A: Dividend is the reward or cash or stock given to the stockholders for the shares held by the company…

Q: The price of the stock will be $. (Round to the nearest cent.)

A: Stock Price: It refers to the current value of the stock to the buyers and sellers. Thus, it is…

Q: Measuring growth) If Pepperdine, Inc.'s return on equity is 17 percent and the management plans to…

A: Return on equity is the measure that determines the financial performance of a corporation in…

Q: Suppose in 2023 the expected dividends of Fordson, Inc. stock will equal $260M with a discount rate…

A: SOLUTION:The DDM is a valuation model that estimates the present value of a company's stock based on…

Q: Suppose in 2023 the expected dividends of Fordson, Inc. stock will equal $260M with a discount rate…

A: The objective of the question is to determine the change in the value of Fordson, Inc. if the…

Q: CX Enterprises has the following expected dividends: $1.15 in one year, $1.23 in two years, and…

A: Companies can distribute their earnings to shareholders by paying dividends. Companies give…

Q: our company has just successfully completed some work that leads you to expect that its earnings and…

A: In this we have to calculate present value of dividend and intrinsic value of stock.

Q: Company Z's earnings and dividends per share are expected to grow indefinitely by 4% a year. If next…

A: Dividend is the part or share of profits that is being distributed to the shareholders of the…

Question

Your firm has an ROE of 12.1%, a payout ratio of 21%, $581,200 of stockholders' equity, and $366,400 of debt. If you
grow at your sustainable growth rate this year, how much additional debt will you need to issue?
The sustainable growth rate is % (Round to three decimal place.)

Video Video

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Analysis

VIEW

Step 2: Calculation of sustainable growth rate

VIEW

Step 3: Calculation of additional debt issued

VIEW

Solution

VIEW

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

Please help
HighGrowth Company has a stock price of $17. The firm will pay a dividend next year of $1.09, and its dividend is expected to grow at a rate of 3.7% per year thereafter. What is your estimate of HighGrowth's cost of equity capital? The required return (cost of capital) of levered equity is %. (Round to one decimal place.)
A firm's stock is selling at 15 pesos. They just paid a 2 peso peso dividend and are expected to grow 6% per year. What is the capital gains yield? dividend yield? required rate of return? Express your answer percentage *
An all-equity-financed firm plans to grow at an annual rate of at least 24%. Its return on equity is 45%. What is the maximum possible dividend payout rate the firm can maintain without resorting to additional equity issues? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
As an analyst, you have gathered the following information on a company you are tracking. The current annual dividend is $1.75. Dividends are expected to grow at a rate of 14% over the next 4 years, and then decline linearly to 5% over the next 7 years, and then remain at a long term equilibrium growth rate of 5% in perpetuity; the required return is 10%. Calculate the value of the company
Consider a firm that just paid a dividend of $5.50 per share. The company expects growth in the coming 2 years to be 17%. After the second year, the firm expects dividends to grow at a constant rate of 3% per year. Assume the required rate of return is 10%
The Kilgon Corp. is experiencing rapid growth. Dividends are expected to grow at 30 percent per year during the next three years, 18 percent over the following year, and then 8 percent per year indefinitely. The required return on this stock is 11 percent, and the stock currently sells for $65 per share. What is the projected dividend for the coming year? How do you use Goal Seek to find the dividends? (Excel)
Laurel Enterprises pays annual dividends, and the next dividend is expected to be in one year. Laurel expects earnings next year of $3.58 per share and has a 50% retention rate, which it plans to keep constant. Its equity cost of capital is 11%, which is also its expected return on new investment; this is expected to continue forever. What do you estimate the firm's current stock price to be? (Hint: its next dividend is due in one year.) C The current stock price will be $ (Round to the nearest cent.)
You anticipate that Liebendauer Enterprises (ticker: LBE) will have earnings per share of $5 this year. Furthermore, you expect that they will pay out $2.50 of these earnings to shareholders in the form of a dividend at the end of this year. You estimate that LBE's return on new investments is 15% and their equity cost of capital is 13%. Your expected growth rate for LBE's dividends will be closest to: OA. 3% OB. 6.5% OC. 7.5% OD. 4.5%
Consider a firm that distributes the entire annual earnings to its shareholders through dividends once a year. The firm’s dividends are expected to grow at a rate of 8% per year for the next 5 years until the end of 2035. From 2036 on, the firm’s growth rate is expected to be 4% per year forever. Assume that investors command 12% return on the investments comparable to the firm’s stock. In addition, the firm has just paid an annual dividend of $10 per share at the end of 2030. Required: If you were considering buying the firm’s shares on the first day of 2031, at what price would you buy the shares?
Jia's Fashions recently paid a R2 annual dividend. The company is projecting that its dividends will grow by 20 percent next year, 12 percent annually for the two years after that, and then at 6 percent annually thereafter. Based on this information, how much should Jia's Fashions common stock sell for today if her required return is 10.5%? Which answer is correct? A. R54.90 B. R60.80 C. R66.60 D. R69.30
An all-equity-financed firm plans to grow at an annual rate of at least 19%. Its return on equity is 31%. What is the maximum possible dividend payout rate the firm can maintain without resorting to additional equity issues? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS