Fundamentals of Corporate Finance with Connect Access Card
11th Edition
ISBN: 9781259418952
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
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 4, Problem 20QP
Sustainable Growth [LO3] Based on the following information, calculate the sustainable growth rate for Hendrix Guitars, Inc.:
| Profit margin | = 5.9% |
| Total asset turnover | = 1.90 |
| Total debt ration | = .35 |
| Payout ratio | = 30% |
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Need answer of this question
Provide solution for this question
Sustainable Growth Rate The Raindrop Company has an ROE of 12.1 percent and a payout ratio of 25 percent.a. What is the company’s sustainable growth rate?b. Can the company’s actual growth rate be different from its sustainable growth rate? Why or why not?c. How can the company increase its sustainable growth rate?
Chapter 4 Solutions
Fundamentals of Corporate Finance with Connect Access Card
Ch. 4.1 - What are the two dimensions of the financial...Ch. 4.1 - Prob. 4.1BCQCh. 4.2 - Prob. 4.2ACQCh. 4.2 - Prob. 4.2BCQCh. 4.3 - Prob. 4.3ACQCh. 4.3 - Prob. 4.3BCQCh. 4.4 - How is a firms sustainable growth related to its...Ch. 4.4 - What are the determinants of growth?Ch. 4.5 - What are some important elements that are often...Ch. 4.5 - Why do we say planning is an iterative process?
Ch. 4 - Prob. 4.1CTFCh. 4 - Prob. 4.2CTFCh. 4 - A firm has current sales of 272,600 with total...Ch. 4 - Prob. 4.4CTFCh. 4 - What is generally considered when compiling a...Ch. 4 - Sales Forecast [LO1] Why do you think most...Ch. 4 - Sustainable Growth [LO3] In the chapter, we used...Ch. 4 - External Financing Needed [LO2] Testaburger, Inc.,...Ch. 4 - EFN and Growth Rates [LO2, 3] Broslofski Co....Ch. 4 - Prob. 5CRCTCh. 4 - Prob. 6CRCTCh. 4 - Prob. 7CRCTCh. 4 - Prob. 8CRCTCh. 4 - Cash Flow [LO4] Which was the biggest culprit...Ch. 4 - Prob. 10CRCTCh. 4 - Pro Forma Statements [LO1] Consider the following...Ch. 4 - Pro Forma Statements and EFN [LO1, 2] In the...Ch. 4 - Prob. 3QPCh. 4 - EFN [LO2] The most recent financial statements for...Ch. 4 - EFN [LO2] The most recent financial statements for...Ch. 4 - Calculating Internal Growth [LO3] The most recent...Ch. 4 - Calculating Sustainable Growth [LO3] For the...Ch. 4 - Sales and Growth [LO2] The most recent financial...Ch. 4 - Calculating Retained Earnings from Pro Forma...Ch. 4 - Prob. 10QPCh. 4 - EFN and Sales [LO2] From the previous two...Ch. 4 - Internal Growth [LO3] If Stone Sour Co. has an ROA...Ch. 4 - Sustainable Growth [LO3] If Gold Corp. has an ROE...Ch. 4 - Sustainable Growth [L03] Based on the following...Ch. 4 - Sustainable Growth [LO3] Assuming the following...Ch. 4 - Full-Capacity Sales [LO1] Southern Mfg., Inc., is...Ch. 4 - Fixed Assets and Capacity Usage [LO1] For the...Ch. 4 - Growth and Profit Margin [LO3] Dante Co. wishes to...Ch. 4 - Growth and Assets [LO3] A firm wishes to maintain...Ch. 4 - Sustainable Growth [LO3] Based on the following...Ch. 4 - Sustainable Growth and Outside Financing [LO3]...Ch. 4 - Sustainable Growth Rate [LO3] Gilmore, Inc., had...Ch. 4 - Internal Growth Rates [LO3] Calculate the internal...Ch. 4 - Prob. 24QPCh. 4 - Prob. 25QPCh. 4 - Calculating EFN [LO2] In Problem 24, suppose the...Ch. 4 - EFN and Internal Growth [LO2, 3] Redo Problem 24...Ch. 4 - EFN and Sustainable Growth [LO2, 3] Redo Problem...Ch. 4 - Constraints on Growth [LO3] Volbeat, Inc., wishes...Ch. 4 - EFN [LO2] Define the following:...Ch. 4 - Growth Rates [LO3] Based on the result in Problem...Ch. 4 - Sustainable Growth Rate [LO3] In the chapter, we...Ch. 4 - Calculate the internal growth rate and sustainable...Ch. 4 - SS Air is planning for a growth rate of 12 percent...Ch. 4 - Prob. 3M
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Calculate the sustainable growth rate given the following information: debt/equity ratio = 60%; profit margin = 5%; dividend payout ratio = 50%; capital intensity ratio = 1. Multiple Choice 4.17% 8.26% 7.26% 4.26% 6.26%arrow_forwardProvide correct solution of this questionarrow_forwardand the company wishes to maintain a constant payout ratio. Next year's sales are projected to What is the external financing needed? 5. EFN [LO2] The most recent financial statements for Assouad, Inc., are shown here: Income Statement Balance Sheet 5 Q Sales $8,700 5,600 $3,100 Current assets Fixed assets $ 4,200 10,400 Costs Taxable income Current liabilities Long-term debt Equity 3,800 Q Taxes (25%) 775 Total $14,600 8,900 Net income $2,325 Total $14,600 Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 40 percent dividend payout ratio. As with every other firm in next year's sales are projected to increase by exactly 15 percent. What is the external financing needed?arrow_forward
- Hi expert. Need helparrow_forwardThe Stieben Company has determined that the following will be true next year: T(ratio of total assets of sales)=1 P(net profit of margin)=5% d(dividend pay out ratio)=50% L(debt equity ratio)=1 a) What is Stieben's sustainable growth rate in sales? b)Can Stieben's actual growth rate in sales be different from its sustainable growth rate? Why or why not? c) How can Stieben change its sustainable growth?arrow_forwardAssume the following ratios are constant. Total asset turnover 1.49 Profit margin 8.7% Equity multiplier 1.6 Payout ratio 55% What is the sustainable growth rate?arrow_forward
- H3. A firm wishes to maintain an sustainable growth rate of 9 percent and a dividend payout ratio of 64 percent. The ratio of total assets to sales is constant at 0.9, and the profit margin is 10.1 percent. If the firm also wishes to maintain a constant debt-equity ratio, what must it be? Please show proper step by step calculationarrow_forwardNeed answer pleasearrow_forwardYou’ve collected the following information about Odyssey, Inc.:Sales =$165,000Net income = $14,800Dividends = $9,300Total debt = $68,000Total equity = $51,000What is the sustainable growth rate for the company? If it does grow at this rate, how much new borrowing will take place in the coming year, assuming a constant debt –equity ratio? What growth rate could be supported with no outside financing at all?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
FIN 300 Lab 1 (Ryerson)- The most Important decision a Financial Manager makes (Managerial Finance); Author: AllThingsMathematics;https://www.youtube.com/watch?v=MGPGMWofQp8;License: Standard YouTube License, CC-BY
Working Capital Management Policy; Author: DevTech Finance;https://www.youtube.com/watch?v=yj-XbIabmFE;License: Standard Youtube Licence