Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN: 9781337395083

Author: Eugene F. Brigham, Phillip R. Daves

Publisher: Cengage Learning

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You’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?

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Suppose the profitable company, Hermes, Inc., previously calculated its external financing needs (EFN) to be $18,200,000. What will happen to the EFN if management now decides to decrease the dividend payout ratio from 35.00% to 25.00%? (1) It will increase to some value greater than $18,200,000. (2) It will fall to some value lower than $18,200,000. (3) It will remain at $18,200,000. (4) The answer depends on Hermes, Inc.’s growth rate in sales. (5) The answer depends on Hermes, Inc.’s profit margin.

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Wanbay Corporation is interested in estimating its additional financing needed to support a growth in sales next year. Last year, revenues were RM1million; net profit margin was 6 percent; investment in assets was RM750,000; payables and accruals were RM100,000; stockholders’ equity at the end of the year was RM450,000. The venture did not pay out any dividends and does not expect to pay dividends for the future.
(a) Elaborate the concept of sustainable sales growth rates in relation to the additional fund needed (AFN)
(b) Calculate the additional fund needed (AFN) next year to support a 30 percent increase in sales.

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Tinsley, Incorporated, wishes to maintain a growth rate of 17 percent per year and a debt-equity ratio of 1.1. The profit margin is 4.4 percent, and total asset turnover is constant at 1.04.
What is the dividend payout ratio?
Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
What is the maximum sustainable growth rate for this company?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

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You have located the following information on Webb’s Heating & Air Conditioning: debt ratio is 63 percent, capital intensity is 1.20 times, profit margin is 11.6 percent, and the dividend payout is 16.00 percent.
Calculate the sustainable growth rate for Webb. (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Sustainable growth rate = ____.__ %

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Bio-Plasma Corporation is growing at 31% per year. It is all-equity-financed and has total assets of $2.7 million. Its return on equity is 22%. Its plowback ratio is 45%. What is the internal growth rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place. What is the firm’s need for external financing this year? Note: Enter your answer in dollars not in millions. By how much would

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Widgets Inc has an expected EBIT of $64,000 in perpetuity and a tax rate of 35 percent. The firm has$95,000 in outstanding debt at an interest rate of 8.5 percent, and its unlevered cost of capital is 15percent. What is the value of the firm according to M&M Proposition I with taxes? Should the companychange its debt–equity ratio if the goal is to maximize the value of the firm? Explain.

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Suppose SBD Bank has RSA of $150m and RSL of $140m. If interest rates rise by 1 percent on both RSAs and RSLs, what would be the expected annual change in net interest income (ΔNII) based on $GAP? Show your work. (
How a commercial bank’s value would be affected by an increase in economic growth?

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If company’s debt-to-equity ratio is 0.25, what is the weighted average cost of capital for the company if the required rate of return is 12. 1% and the cost of debt is 6.5%? Assume no tax rate
A 7.90%
B 7.62%
C 10.98%
D 10.70%
E 9.30%
Company is considering investing in a project. After consulting with their analysts, they find that the payback period for the project is 2 years and 6 months. If cash inflows are $4, 000. then the initial investment is.
Answer rounded to the nearest whole dollar

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The ROA of your firm is 5%. The firm also has a debt-asset ratio of 70%. If your firm reinvests 100% of its earnings, at what rate can your assets grow without having to change your capital structure?
Further, at what rate can your assets grow without having to raise capital externally?
I know the formula for sustainable growth is
ROE x b / 1 - ROE x b
Internal growth
ROA x 1 - b / 1 - (ROA x 1- b)
But I do not know how to get the information with what is provided. I think I'm missing a formula to go from ROA (which is the 5% provided) to ROE.
Can you show me how to solve this problem?
Thank you in advance for your help.

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If the SGS Corp. has an ROE of 14.5 percent and a payout ratio of 25 percent, what is its sustainable growth rate?
Found in MBA 640 Finance, Economics and Decision Making
in Chapter 3 questions and problems #6

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Stevensons bakeries and all equity firm that has a projected perpetual EBIT of $144,000 per year. The cost of equity is 10.5% and the tax rate is 21%. Assume there's no depreciation, no capital spending and no change in networking capital. The firm can borrow perpetual debt at 5.8%. Currently, the firm is considering converting to a debt equity ratio of .54. What is the firms levered value? MM assumptions hold.

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