Assume the following ratios are constant. Total asset turnover Profit margin Equity multiplier Payout ratio || || || || Sustainable growth rate 2.27 5.5% 1.74 What is the sustainable growth rate? Note: Do not round intermediate calculations and enter your answer as a percent 38% %

Assume the following ratios are constant. Total asset turnover Profit margin Equity multiplier Payout ratio || || || || Sustainable growth rate 2.27 5.5% 1.74 What is the sustainable growth rate? Note: Do not round intermediate calculations and enter your answer as a percent 38% %

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: Juan purchased a new automobile for $20,000. Juan made a cash down payment of $5,000 and agreed to…

A: The amount of the required monthly payment can be calculated using the financial calculator with…

Q: The days to maturity for a sample of five money market funds are shown here. The dollar amounts…

A: Here, Days to MaturityDollar Value17 $ 15.0013 $ 10.006 $ 25.005 $…

Q: Bob earns $48,000 per year and his wife Susan earns $ 50,000 per year gross. They have debt as…

A: The objective of the question is to calculate the maximum amount of a mortgage loan that Bob and…

Q: A stock index is currently 1,500. Its volatility is 18%. The risk-free rate is 4% per annum…

A: An option is an agreement between two parties granting one the opportunity to buy or sell a security…

Q: Suppose the quoted spot rates are EUR0.951/USD and JPY141.52/USD. You are a U.S. citizen that has…

A: Spot rate for JPY and USD = JPY 141.52 / USDSpot rate for EUR and USD = EUR 0.951 / USDSalary offer…

Q: What provides the framework for conducting return on assets (ROA) analysis by incorporating revenues…

A: The objective of the question is to identify the framework that allows for the calculation of Return…

Q: You are considering making a movie. The movie is expected to cost $10.1 million up front and take a…

A: The payback period represents the duration needed to recover the initial investment, and a shorter…

Q: Renaldo Cross Company paid $2,000 interest on short-term notes payable, $10,000 principal of…

A: Paid interest on notes payable = $2000Paid principal on long-term bonds = $10,000Dividends paid on…

Q: Your bank account pays a 5% nominal rate of interest. The interest is compounded quarterly. Which of…

A: The objective of the question is to determine the correct statement about the periodic and effective…

Q: A truck costs $105,000 when new and has accumulated depreciation of $100,000. Suppose Jackson Towing…

A: Cost of truck = $105,000Accumulated Depreciation = $100,000Cash Paid = $46,000Market Value of New…

Q: Suppose the nominal interest rate in the U.S. is 5% per year, the nominal interest rate in Brazil is…

A: International Fisher Effect states that the future exchange rate between 2 countries is the interest…

Q: Paul just graduated from college and landed his first "real" job, which pays $26 comma 40026,400 a…

A: The objective of this question is to calculate the future value of Paul's salary considering the…

Q: We are evaluating a project that costs $845,000, has an eight-year life, and has no salvage value.…

A: Given parameters:Initial investment (project cost): $845,000Project life: 8 yearsSalvage value:…

Q: Assume that you own an annuity that will pay you $15,000 per year for 12 years, with the first…

A: An annuity refers to a series of cash flows occurring at regular intervals. Here the cash flow…

Q: Assume you are 25 and earn $30 comma 90030,900 per year, never expect to receive a raise, and…

A: Future value refers to the value of an investment or cash flow at a specific date in the future,…

Q: ABC is considering investing in a project that has an initial cost of $560,000. The project will…

A: NPV refers to Net Present Value. NPV is used to measure the profitability of a project. It is…

Q: Arthur just took out a loan from the bank for $16,900.00. He plans to repay this loan by making a…

A: To find the amount of the regular quarterly payment, X, we can follow these steps:1: Calculate the…

Q: You are evaluating two mutually exclusive projects. Period Project X Project Y 0 - $5,000 - $4,000 1…

A: YearProject XProject Y0 $(5,000.00) $(4,000.00)1 $ 3,250.00 $ 3,250.002 $ 3,250.00 $…

Q: (Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 13-year, $1,000…

A: The price of a bond refers to the value at which it is traded in the market. It is determined by…

Q: Although the Chen Company's milling machine is old, it is still in relatively good working order and…

A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Q: Consider the following $1,000 face value bond which makes semi-annual coupon payments, Bond Bank of…

A: Price of bond is quoted price of bond and plus the accrued interest on the bond and that is the full…

Q: You are considering an investment in Fields and Struthers, Incorporated, and want to evaluate the…

A: Here,EBIT is $66 millionTax Rate is 21%Depreciation is $5 millionIncrease in Fixed Asset is $32…

Q: required by the market for a portfolio with a beta of 1 is 13.0%. According to the capital asset…

A: Risk free rate=6%Rate of return with beta 1=13.0%Dividend next=$9Price=$105

Q: XYZ company issued new securities to finance a new TV show. The project cost 500000and…

A: The objective of the question is to calculate the total flotation cost for the firm and the total…

Q: Holiday Brands issued $20 million of 5%, 30-year bonds for $17.5 million. What is the amount of…

A: Given ,Face amount = $20 million = $20,000,000Annual rate = 5% fraction of year (semiannually ) =

Q: 1. Oasis Pods has been working on a new sustainable business that uses plastic waste to create…

A: “Since you have posted multiple questions, we will provide the solution only to the first question…

Q: Equipment with a book value of $11,000 will be sold at the end of a project for a salvage value of…

A: The objective of the question is to calculate the tax effect resulting from the profit or loss from…

Q: The Bluebird Company has a $10,000 liability it must pay three years from today. The company is…

A: The objective of the question is to find out the initial deposit that the Bluebird Company needs to…

Q: Individual A owns shares of a Canadian-controlled private corporation. All of the corporation's past…

A: In this scenario, Individual A will realize a capital gain on the redemption of their shares.…

Q: You are considering buying a bond that pay 20 semi-annual coupons of S 50 over the remaining…

A: Price of bond is the present value of coupon payments plus present value of par value of the bond…

Q: uffert Industries has total assets of $970,000 and total current liabilities (consisting only of…

A: Total assets=$970000Current liabilities=$115000BEP ratio=17%Debt=9%Tax =25%Debt/capital=40%

Q: True or False? Extended disbursement float has to do with the length of time a corporation takes to…

A: The objective of the question is to determine whether the statement about extended disbursement…

Q: Kiddy Toy Corporation needs to acquire the use of a machine to be used in its manufacturing process.…

A: Here,Details of Buying Option: Purchase Price of Machine -$1,77,000.00Life of Machine in…

Q: For each of the following annuities, calculate the annual cash flow: Note: Do not round intermediate…

A: The problem can be resolved by applying the subsequent formula.PMT = P / ((1-(1/(1+r)n))/r)Where,P =…

Q: Your bank pays 4% interest annually. You have $2,500 invested in the bank. How long will it take for…

A: The objective of the question is to find out how long it will take for an investment to double given…

Q: Projected Operating Assets Berman & Jaccor Corporation's current sales and partial balance sheet are…

A: Cash, accounts receivable, inventories and net fixed assets are Operating assets.

Q: Striped Potato is evaluating a project that would require the purchase of a piece of equipment for…

A: The objective of the question is to calculate the tax rate for the first year of the project. The…

Q: If you deposit $50,000 in an account that pays an annual interest rate of 10% compounded monthly,…

A: The objective of this question is to calculate the future value of an investment given the initial…

Q: Problem 14-14 WACC [LO3] Ursala, Incorporated, has a target debt-equity ratio of .85. Its WACC is…

A: The objective of the question is to calculate the pretax cost of debt and the cost of equity for…

Q: You are running a hot Internet company. Analysts predict that its earnings will grow at 10 % per…

A: The present value of future earnings is the current valuation of anticipated income or cash flows,…

Q: (Loan amortization) To buy a new house you must borrow $140,000. To do this you take out a $140,000,…

A: Loan amortization refers to the systematic repayment of a loan over a specific period of time. It…

Q: A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a…

A: An individual, group, or investment fund may own a portfolio, which is a collection or combination…

Q: On average, it will take you sell to the firm on credit. days to receive the payments, therefore,…

A: The operating cycle of a firm is time period from the purchase of raw materials till the receipt of…

Q: Jim deposits $5,000 today into an account that pays 13% per year, and follows it up with three more…

A: The objective of the question is to calculate the total amount of money that Jim will have in his…

Q: Project Beta is a 7-year project which requires an initial outlay of $6,000. This outlay will be…

A: The objective of the question is to calculate the annual incremental Earnings Before Interest and…

Q: Last year Berry Co. reported total assets of $400, equity of $200, net income of $50, dividends of…

A: Return on Equity (ROE) = Net Income / EquityReturn on Equity (ROE) = $50 / $200 = 0.25Return on…

Q: The Winter 2024 fashion scene has influ ced you to by some Totome boots for $815.20. A friend buys…

A: Money borrowed=$815.20First payment=$326.08Second payment=$504Interest rate=2.2%Semi annual…

Q: Consider the following information for three stocks, Stocks A, B, and C. The returns on the three…

A: The Capital Asset Pricing Model (CAPM) is a financial model that establishes a linear relationship…

Q: Quantitative Problem: You are holding a portfolio with the following investments and betas: Dollar…

A: We can employ the Capital Asset Pricing Model (CAPM) formula. This formula helps us determine the…

Q: Problem 4-1 You are trying to decide how much to save for retirement. Assume you plan to save $4000…

A: Annual savings = $4000Investment return = 5%Work years =43Retirement horizon =20 yearsTo find: a)…

Question

Assume the following ratios are constant.
Total asset turnover
Profit margin
Equity multiplier
Payout ratio
=
|| || || ||
Sustainable growth rate
=
=
2.27
5.5%
1.74
What is the sustainable growth rate?
Note: Do not round intermediate calculations and enter your answer as a percent
38%
%

Expert Solution

This question has been solved!

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

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Conceptual Introduction:

VIEW

Step 2: Computation of sustainable growth rate:

VIEW

Step 3: Working note:

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 5 images

SEE SOLUTION Check out a sample Q&A here

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

Match each term with the best definition or descriptor. NPV is __________ ( a unitless ratio, a unit of time, a dollar vallue, or a rate of return). IRR is ___________ ( a unitless ratio, a unit of time, a dollar vallue, or a rate of return). Profitability index is __________( a unitless ratio, a unit of time, a dollar vallue, or a rate of return).
Which one of the following is an indicator that an investment is acceptable? Check all that apply: Profitability index equal 1.5 Profitability index greater than 0 the required return less than internal rate of return IRR equal to zero Payback period exceeds the required period Profitability index equal 1
Compute the expected rate of return on investment i given the followinginformation: Rf = 8%; E(RM) = 14%; βi = 1.0.b. Recalculate the required rate of return assuming βi is 1.8.
es Suppose the returns on an asset are normally distributed. The historical average annual return for the asset was 5.7 percent and the standard deviation was 18.3 percent. a. What is the probability that your return on this asset will be less than -4.1 percent in a given year? Use the NORMDIST function in Excel® to answer this question. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What range of returns would you expect to see 95 percent of the time? (Enter your answers for the range from lowest to highest. A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c. What range of returns would you expect to see 99 percent of the time? (Enter your answers for the range from lowest to highest. A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter…
The internal rate of return equals the rate that yields a profitability index of 1 for an investment. True O False
Assume that there are two factors that price assets. Risk free rate is 4%. Factor 1 has anexpected return of 8% and factor 2 has an expected return of 10%. Calculate the expectedreturn for each asset with the following sensitivities using the Arbitrage Pricing Theory (APT). (a) β1 = 1.2, β2 = 0.9; (b) β1 = 1.5, β2 = −0.60;
The lowest rate of return possible is:a. 0%b. -∞c. -100%d. the company’s MARR
1. If you perform a NPV analysis on a perspective investment using a "d" = 15% and: a. the NPV Is < 0, what can you tell me about the investment's IRR (time adjusted rate of return)? b. the NPV is > 0, what can you tell me about the investment's IRR (time adjusted rate of return)? c. the NPV is= 0, what can you tell me about the investment's IRR (time adjusted rate of return)? 2. We presume in Investment analysis that the payback method of evaluation is a better measure of.................than it is a measure of...................... We also think less of the payback method because it sometimes ignores the............., ..................of an investment since the................. the oftentimes occurs after the payback period has lapsed. 3. Please explain why we oftentimes equate EBITDA (earnings before subtracting] interest, taxes, depreciation & amortization) with NOI (net operating income) in examining business' profitability. Why don't…
n is the number of periods of an investment, PV is the starting value, FVn is the future value n periods ahead, and ^ means 'to the power of'. What is the correct formula for calculating return? a)(PV/FVn)^n - 1 b)(FVn/PV)^n c)1 - (FVn/PV)^n d)(FVn/PV)^n - 1
QB: .Determine the covariance between assets R and S with the following data: State Prob Return J Return S Boom 0.1 16 22 Recession 0.2 -7 -4 Normal 0.4 12 11 Recovery 0.1 11 16 Slow Growth 0.2 14 20 Is it advisable to diversify?
3. Compute Project Y’s accounting rate of return. The numerator drop down options are: accounts receivable, annual income, average investment, average total assets, cost of goods sold, current assets, current liabilities, net sales, total assets The denominator dropdown options are: accounts receivable, annual income, average investment, average total assets,
Required information Problem 24-2A (Algo) Payback period, accounting rate of return, net present value, and net cash flow calculation LO P1, P2, P3 [The following information applies to the questions displayed below.] Project Y requires a $306,000 investment for new machinery with a six-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project Y $ 370,000 165,760 51,000 26,000 $ 127,240

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