PRIN.OF CORPORATE FINANCE (LL) >CUSTOM<
12th Edition
ISBN: 9781260439137
Author: BREALEY
Publisher: MCG CUSTOM
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Textbook Question
Chapter 29, Problem 25PS
- a. What is the internal growth rate of Eagle Sport (see Problem 24) if the dividend payout ratio is fixed at 60% and the equity-to-asset ratio is fixed at two-thirds?
- b. What is the sustainable growth rate?
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A firm’s sustainable growth rate can be calculated using the formula
Sustainable growth rate = (p(S/A)(1 + D/E) x R) / [1 – (p(S/A)(1 + D/E) x R)]
Discuss the relationship between sustainable growth rate and each of the four variables in the above formula
Assume that the following ratios are constant. Total asset turnover 1.37, profit margin 6.9%, equity multiplier 1.7, payout ratio 57%. What is the sustainable growth rate?
Assuming the following ratios are
constant, what is the sustainable
growth rate?
PLEASE INCLUDE EXCEL
FUNCTIONS.
Thank you!
Assuming the following ratios are constant, what is the sustainable growth rate?
Total asset turnover
Profit margin
Equity multiplier
Payout ratio
Plowback ratio
3.40
5.2%
Complete the following analysis. Do not hard code values in your calculations.
Return on equity
22.98%
Sustainable growth rate
1.30
35%
Chapter 29 Solutions
PRIN.OF CORPORATE FINANCE (LL) >CUSTOM<
Ch. 29 - Prob. 1PSCh. 29 - Prob. 2PSCh. 29 - Sources and uses of cash and working capital...Ch. 29 - Sources and uses of cash State whether each of the...Ch. 29 - Prob. 5PSCh. 29 - Forecasts of payables Dynamic Futon forecasts the...Ch. 29 - Prob. 8PSCh. 29 - Prob. 9PSCh. 29 - Prob. 10PSCh. 29 - Prob. 11PS
Ch. 29 - Cash cycle A firm is considering several policy...Ch. 29 - Prob. 13PSCh. 29 - Collections on receivables If a firm pays its...Ch. 29 - Short-term financial plans Which items in Table...Ch. 29 - Prob. 16PSCh. 29 - Short-term financial plans Work out a short-term...Ch. 29 - Prob. 18PSCh. 29 - Prob. 19PSCh. 29 - Long-term financial plans Corporate financial...Ch. 29 - Prob. 21PSCh. 29 - Long-term financial plans a. Use the Dynamic...Ch. 29 - Long-term plans The financial statements of Eagle...Ch. 29 - Forecast growth rate a. What is the internal...Ch. 29 - Forecast growth rate Bio-Plasma Corp. is growing...Ch. 29 - Long-term plans Table 29.19 shows the 2016...
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- 4. Compute the value of Better Mousetraps for assumed sustainable growth rates of 6% through 9%, in increments of .5%.5. Compute the percentage change in the value of the firm for each 1 percentage point increase in the assumed final growth rate, g.6. What happens to the sensitivity of intrinsic value to changes in g? What do you conclude about the reliability of estimates based on the dividend growth model when the assumed sustainable growth rate begins to approach the discount rate?arrow_forwardA firm wants a sustainable growth rate of 3.13 percent while maintaining a dividend payout ratio of 27 percent and a profit margin of 6 percent. The firm has a capital intensity ratio of 2. What is the debt-equity ratio that is required to achieve the firm's desired rate of growth? Multiple Choice O OO OO 69 times 61 times 73 times 20 times 39 timesarrow_forward1. What is the Internal Growth rate for Cafes Richard ? What is the sustainable growth rate for Cafes Richard ? If sales grow at SGR, how much External Financing will be needed for the year 2021 using Percentage of sales approach, assuming that the firm is operating at full capacity? Interest expense and tax rate will not change. Calculate the tax rate (hint: tax rate = tax/taxable income). Please create pro forma statements as well. What's the impact in the new Debt to equity ratio, if any?arrow_forward
- A firm can increase its growth rate (g) by 1) Increasing its dividend retention rate 2) Increase its ROE 3) Increase its required return 4) a and b 5) all the abovearrow_forwardA firm wants a sustainable growth rate of 3.38 percent while maintaining a dividend payout ratio of 32 percent and a profit margin of 6 percent. The firm has a capital intensity ratio of 2. What is the debt-equity ratio that is required to achieve the firm's desired rate of growth?arrow_forwardA firm wants a sustainable growth rate of 2.73 percent while maintaining a dividend payout ratio of 39 percent and a profit margin of 6 percent. The firm has a capital intensity ratio of 2. What is the debt–equity ratio that is required to achieve the firm's desired rate of growth?arrow_forward
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