Business has been good for Keystone
a. Determine the compound annual rate of growth in earnings
b. Based on the growth rate determined in part a, project earnings for next year
c. Assume the dividend pay out ratio is 40 percent. Compute
d. The current price of the stock is
e. If the flotation cost is
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FOUND.OF FINANCIAL MANAGEMENT-ACCESS
- Company A showed a profit of $1.9 million last year. The CEO of the company expects the profit to increase by 8% each year over the next 5 years and the profits will be continuously invested in an account bearing a 4.5% APR compounded continuously. (a) Write the flow rate, R, of the income stream. (Let t represent the number of years after the company showed a profit of $1.9 million.) R(t) = 1.9(1.08)' million dollars per year (b) Calculate the 5-year future value. (Round your answer to three decimal places.) $ 218.544 x million (c) Calculate the 5-year present value. (Round your answer to three decimal places.) $ 265.686 x millionarrow_forwardJasmine Manufacturing wishes to maintain a sustainable growth rate of 9.75 percent a year, a debt-equity ratio of 48, and a dividend payout ratio of 28.5 percent. The ratio of total assets to sales is constant at 1.27. What profit margin must the firm achieve in order to meet its growth rate goal? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Profit margin % 4arrow_forwardRamble On Co. wishes to maintain a growth rate of 10.4 percent per year, a debt-equity ratio of 1.0, and a dividend payout ratio of 15 percent. The ratio of total assets to sales is constant at .82. What profit margin must the firm achieve? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Profit margin % 8.26arrow_forward
- Sisyphus Corp. has projected that their performance for the next five years results in the following: YEAR Revenue Cash Operating Expenses 1 50 30 2 55.00 33.00 3 60.50 36.30 4 66.55 39.93 5 73.21 43.92 Terminal value was assumed based on the growth rate of the cash flows. Annual Capital investment requirement is at P2 million. Income Tax rate is at 30%. The required rate or return for their business is 14%. Requirement: Compute for the growth rate How much is the Terminal Value? How much is the Free Cash Flow for years 1-5? How much is the Discounted Net Cash Flows to the Firm for years 1-5?arrow_forwardChadron Motors has a profit margin of 5 percent and a dividend payout ratio of 20 percent. The total asset turnover is 1.8 and the debt-equity ratio is .4. What is the sustainable rate of growth? A. 9.17 percent B. 9.84 percent C. 11.21 percent D. 10.52 percent E. 8.51 percent Chadron Co. wishes to maintain a growth rate of 9.89 percent a year, a constant debt-equity ratio of .42, and a dividend payout ratio of 40 percent. The ratio of total assets to sales is constant at 1.36. What profit margin must the firm achieve? A. 13.73 percent B. 14.37 percent C. 8.13 percent D. 14.79 percent E. 13.31 percent Chadron Markets is operating at full capacity with a sales level of $547,200 and fixed assets of $560,000. The profit margin is 5.4 percent. What is the required addition to fixed assets if sales are to increase by 4 percent? A. $14,680 B. $10,709 C. $18,840 D. $16,760 E. $22,400arrow_forwardChadron Motors has a profit margin of 5 percent and a dividend payout ratio of 20 percent. The total asset turnover is 1.8 and the debt-equity ratio is .4. What is the sustainable rate of growth? A. 9.17 percent B. 9.84 percent C. 11.21 percent D. 10.52 percent E. 8.51 percent Chadron Co. wishes to maintain a growth rate of 9.89 percent a year, a constant debt-equity ratio of .42, and a dividend payout ratio of 40 percent. The ratio of total assets to sales is constant at 1.36. What profit margin must the firm achieve? A. 13.73 percent B. 14.37 percent C. 8.13 percent D. 14.79 percent E. 13.31 percent Chadron Markets is operating at full capacity with a sales level of $547,200 and fixed assets of $560,000. The profit margin is 5.4 percent. What is the required addition to fixed assets if sales are to increase by 4 percent? A. $14,680 B. $10,709 C. $18,840 D. $16,760 E. $22,400. Please answer completearrow_forward
- An asset manager is valuing the listed company EVORA with expected year-on-year growth rate of EBIT as given in Table 1. Year 1 is the company's first year of activity. Table 1 Year 2 Year 3 Year 4 Year 5 +2% +6% +5% + 2% how to compute sales???? The EBIT margin (as percentage of sales) is expected to grow 55 basis points (0.55%) per year between year 2 and year 5. In year 1, the expected level of sales is €67,000 with EBIT margin of 6%. Additional assumptions are: Depreciation: 5% of sales, all years Recurrent Capex: 7% of sales for year 1, with percentage decreasing 45 basis points per year until year 4 Change in working capital: 12% of yearly changes of EBIT Tax rate: 20% Target capital structure: debt/( debt + equity) ratio of 55% Asset beta: 1.35 Risk-free rate: 3% Equity risk premium: 6% Debt spread: 4% To answer the following questions, make plausible assumptions if necessary. a. Compute the Free Cash Flows to the Firm (FCF) for the period from year 1 until year 5, including…arrow_forwardCompany C showed a profit of $1.4 million last year. The CEO of the company expects the profit to decrease by 7% each year over the next five years and the profits will be continuously invested in an account bearing a 4.75% APR compounded continuously (a) Write the flow rate, R, of the income stream. (Let t represent the number of years after the company showed a profit of $1.4 million) R(E)- million dollars per year (b) Calculate the 5-year future value. (Round your answer to three decimal places) S million (e) Calculate the 5-year present value. (Round your answer to three decimal places.) million Sarrow_forwardTinsley, Incorporated, wishes to maintain a growth rate of 13 percent per year and a debt-equity ratio of .3. The profit margin is 5 percent, and total asset turnover is constant at 1.2. a. 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. b. 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. a. Dividend payout ratio b. Sustainable growth rate % %arrow_forward
- Jasmine Manufacturing wishes to maintain a sustainable growth rate of 10.25 percent a year, a debt-equity ratio of .46, and a dividend payout ratio of 29.5 percent. The ratio of total assets to sales is constant at 1.29. What profit margin must the firm achieve?arrow_forwardThe FI’s initial balance sheet is assumed to be: "Picture 1" Duration of assets is 5 years and duration of liabilities is 3 years. If the manager learns from an economic forecasting unit that rates are expected to rise from 10 to 11% in the immediate future, what is the potential loss or gain to equity holders’ net worth?arrow_forwardPharoah Inc., is expected to grow at a rate of 20.000 percent for the next five years and then settle to a constant growth rate of 12.000 percent. The company recently paid a dividend of $2.35. The required rate of return is 17.000 percent.Excel Template(Note: This template includes the problem statement as it appears in your textbook. The problem assigned to you here may have different values. When using this template, copy the problem statement from this screen for easy reference to the values you’ve been given here, and be sure to update any values that may have been pre-entered in the template based on the textbook version of the problem.) (a) Find the present value of the dividends during the rapid-growth period if dividends grow at the same rate as the company. (Round dividends to 3 decimal places, e.g. 3.351. Round present value of dividends to 2 decimal places, e.g. 15.20.) Present value of dividends $Type your answer herearrow_forward
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT