Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 14, Problem 1LIC
To determine
Assume the long run growth of Company S beginning in the year +6 will be 1% instead of 3%. With a growth rate of 1%, year +6 comprehensive income will be $2,900 million. Compute the price differential of S Company at the end of 2012.
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Plank’s Plants had net income of $3,000 on sales of $40,000 last year. The firm paid a dividend of $1,500. Total assets were $200,000, of which $140,000 was financed by debt.
What is the firm’s sustainable growth rate?
If the firm grows at its sustainable growth rate, how much debt will be issued next year?
What would be the maximum possible growth rate if the firm did not issue any debt next year?
Plank’s Plants had net income of $10,000 on sales of $40,000 last year. The firm paid a dividend of $2,300. Total assets were $700,000, of which $350,000 was financed by debt.
a. What is the firm’s sustainable growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
b. If the firm grows at its sustainable growth rate, how much debt will be issued next year? (Do not round intermediate calculations.)
c. What would be the maximum possible growth rate if the firm did not issue any debt next year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
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.
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Chapter 14 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
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