Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
9th Edition
ISBN: 9781259277214
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 3, Problem 41QP
Growth and Assets. A firm wishes to maintain an internal growth rate of 6.8 percent and a dividend payout ratio of 25 percent. The current profit margin is 7.3 percent and the firm uses no external financing sources. What must total asset turnover be?
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Chapter 3 Solutions
Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 3.1 - Why is it often necessary to standardize financial...Ch. 3.1 - Prob. 3.1BCQCh. 3.2 - What are the five groups of ratios? Give two or...Ch. 3.2 - Turnover ratios all have one of two figures as...Ch. 3.2 - Profitability ratios all have the same figure in...Ch. 3.2 - Given the total debt ratio, what other two ratios...Ch. 3.3 - Return on assets, or ROA, can be expressed as the...Ch. 3.3 - Return on equity, or ROE, can be expressed as the...Ch. 3.4 - What does a firms internal growth rate tell us?Ch. 3.4 - What does a firms sustainable growth rate tell us?
Ch. 3.4 - Why is the sustainable growth rate likely to be...Ch. 3.5 - Prob. 3.5ACQCh. 3.5 - Prob. 3.5BCQCh. 3.5 - Prob. 3.5CCQCh. 3.5 - Prob. 3.5DCQCh. 3 - Section 3.1A common-size balance sheet expresses...Ch. 3 - What are the categories of traditional financial...Ch. 3 - Prob. 3.3CCh. 3 - Prob. 3.4CCh. 3 - Prob. 3.5CCh. 3 - Current Ratio. What effect would the following...Ch. 3 - Current Ratio and Quick Ratio. In recent years,...Ch. 3 - Prob. 3CTCRCh. 3 - Financial Ratios. Fully explain the kind of...Ch. 3 - Standardized Financial Statements. What types of...Ch. 3 - Prob. 6CTCRCh. 3 - Prob. 7CTCRCh. 3 - Prob. 8CTCRCh. 3 - Industry-Specific Ratios. So-called same-store...Ch. 3 - Industry-Specific Ratios. There are many ways of...Ch. 3 - Prob. 11CTCRCh. 3 - Financial Statement Analysis. In the previous...Ch. 3 - Prob. 1QPCh. 3 - Calculating Profitability Ratios. Aguilera, Inc.,...Ch. 3 - Calculating the Average Collection Period. Ordonez...Ch. 3 - Calculating Inventory Turnover. Bobaflex...Ch. 3 - Calculating Leverage Ratios. Fincher, Inc., has a...Ch. 3 - Calculating Market Value Ratios. Rossdale, Inc.,...Ch. 3 - Prob. 7QPCh. 3 - DuPont Identity. Jiminy Cricket Removal has a...Ch. 3 - Calculating Average Payables Period. For the past...Ch. 3 - Equity Multiplier and Return on Equity. Shelton...Ch. 3 - Internal Growth. If Williams, Inc., has an ROA of...Ch. 3 - Sustainable Growth. If the Crash Davis Driving...Ch. 3 - Sustainable Growth. Based on the following...Ch. 3 - Prob. 14QPCh. 3 - Prob. 15QPCh. 3 - Calculating Financial Ratios. Based on the balance...Ch. 3 - DuPont Identity. Suppose that the Bethesda Mining...Ch. 3 - Prob. 18QPCh. 3 - Return on Assets. Beckinsale, Inc., has a profit...Ch. 3 - Calculating Internal Growth. The most recent...Ch. 3 - Calculating Sustainable Growth. For Shinoda...Ch. 3 - Total Asset Turnover. Kalebs Karate Supply had a...Ch. 3 - Return on Equity. Carroll, Inc., has a total debt...Ch. 3 - Market Value Ratios. Ames, Inc., has a current...Ch. 3 - Prob. 25QPCh. 3 - Enterprise ValueEBITDA Multiple. The market value...Ch. 3 - Prob. 27QPCh. 3 - Ratios and Fixed Assets. The Smathers Company has...Ch. 3 - Prob. 29QPCh. 3 - Prob. 30QPCh. 3 - Prob. 31QPCh. 3 - Calculating the Times Interest Earned Ratio. For...Ch. 3 - Return on Assets. A fire has destroyed a large...Ch. 3 - Prob. 34QPCh. 3 - SMOLIRA GOLF. INC. 2016 Income Statement Sales...Ch. 3 - Prob. 36QPCh. 3 - Market Value Ratios. Smolira Golf has 10,000...Ch. 3 - Interpreting Financial Ratios. After calculating...Ch. 3 - Growth and Profit Margin. Fulkerson Manufacturing...Ch. 3 - Market Value Ratios. Abercrombie Fitch and...Ch. 3 - Growth and Assets. A firm wishes to maintain an...Ch. 3 - Prob. 42QPCh. 3 - Prob. 43QPCh. 3 - Constraints on Growth. High Flyer, Inc., wishes to...Ch. 3 - Internal and Sustainable Growth Rates. Best Buy...Ch. 3 - Expanded DuPont Identity. Hershey Co. reported the...Ch. 3 - Ratios and Financial Planning at SS Air, Inc....Ch. 3 - Prob. 2CCCh. 3 - Prob. 3CCCh. 3 - Ratios and Financial Planning at SS Air, Inc....
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- Which of the following statements is correct? A. a. Since accounts payable and accruals must eventually be paid, as these accounts increase, AFN also increases. B. b. Suppose a firm is operating its fixed assets below 100 percent capacity but is at 100 percent with respect to current assets. If sales grow, the firm can offset the needed increase in current assets with its idle fixed assets capacity. C. c. If a firm retains all of its earnings, then it will not need any additional funds to support sales growth. D. d. Additional funds needed are typically raised from some combination of notes payable, long-term bonds, and common stock. These accounts are nonspontaneous in that they require an explicit financing decision to increase them. E. e. All of the statements above are false.arrow_forwardYou've collected the following information about Groot, Inc.: Profit margin Total asset turnover Total debt ratio Payout ratio = 4.44% = 3.50 = .25 = 29% a. What is the sustainable growth rate for the company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the ROA? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Sustainable growth rate b. ROA % 15.54 %arrow_forwardWhen the company is working at full capacity, the assets in the AFN equation is the total assets True False Considering each action independently and holding other things constant, which of the following actions would reduce a firm’s need for additional capital? a. An increase in the dividend payout ratio. b. A decrease in the days sales outstanding. c. An increase in expected sales growth. d. A decrease in the profit margin.arrow_forward
- Which of the following is true? I. If there is no change in gross fixed assets from one year to the next, then net fixed assets would have to have decreased. II. For firms with lower P/E ratios, investors are valuing each dollar of earnings more than for firms with higher P/E ratios. III. A increase in the current ratio indicates an improvement in a firm's long-term solvency condition.arrow_forwardWhich of the following actions can a firm take to increase its current ratio? A. Issue short-term debt and use the proceeds to buy back long-term debt with a maturity of more than one year. B. Reduce the company's days sales outstanding to the industry average and use the resulting cash savings to purchase plant and equipment. C. Use cash to purchase additional inventory. D. Statements a and b are correct. E. None of the statements above is correct.arrow_forwardA firm wants to strengthen its financial position. Which of the following actions would increase its current ratio? 1. b. Reduce the company's days' sales outstanding to the industry average and use the resulting cash savings to purchase plant and equipment. 2. d. Borrow using short-term debt and use the proceeds to repay debt that has a maturity of more than one year. 3. e. Issue new stock and then use some of the proceeds to purchase additional inventory and hold the remainder as cash. 4. a. Use cash to increase inventory holdings. 5. c. Use cash to repurchase some of the company's own stock.arrow_forward
- Q. 4 A firm wishes to maintain an internal growth rate of 6.75% and a dividend payout ratio of 31%. The current profit margin is 5.3% and the frim uses no external financing sources. What must total asset turnover be? (DO NOT round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16) Total asset turnover ? timesarrow_forwardNonearrow_forwardUse the corporate valuation model (non-constant growth) to estimate the value of operations (Vop).arrow_forward
- How would an increase in each of the following factors affect the AFN?1. Payout ratio2. Capital intensity ratio, A0*/S03. Profit margin4. Days sales outstanding, DSO5. Sales growth rateIs it possible for the AFN to be negative? If so, what would this indicate?If excess capacity exists, how would that affect the calculated AFN?arrow_forwardAssume the following ratios are constant. Total asset turnover = 2.19 Profit margin = 4.7% = 1.66 Equity multiplier Payout ratio = 44% 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.) Sustainable growth rate %arrow_forwarda. What percentage of the firm's assets does the firm finance using debt (liabilities)? b. If Campbell were to purchase a new warehouse for $1.1 million and finance it entirely with long-term debt, what would be the firm's new debt ratio? Question content area bottom Part 1 a. What percentage of the firm's assets does the firm finance using debt (liabilities)? The fraction of the firm's assets that the firm finances using debt is 27.827.8%. (Round to one decimal place.) Part 2 b. If Campbell were to purchase a new warehouse for $1.1 million and finance it entirely with long-term debt, what would be the firm's new debt ratio? The new debt ratio will be enter your response here%. (Round to one decimal place.)arrow_forward
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