EFN and Sustainable Growth Redo Problem 27 using sales growth rates of 30 and 35 percent in
Question:
EFN and Sustainable Growth Redo Problem 27 using sales growth rates of 30 and 35 percent in addition to 20 percent, illustrate graphically the relationship between EFN and the growth rate, and use this graph to determine the relationship between them. At what growth rate is the EFN equal to zero? Why is this sustainable growth rate different from that found by using the equation in the text?
Transcribed Image Text:
MOOSE TOURS, INC. 2006 Income Statement Sales $845,000 Costs 657,000 Other expenses 17,500 $170,500 Earnings before interest and taxes Interest paid 12,500 $158,000 Taxable income 55,300 Taxes (35%) $102,700 Net income $30,810 Dividends Addition to retained earnings 71,890 MOOSE TOURS, INC. Balance Sheet as of December 31, 2006 Liabilities and Owners' Equity Assets Current assets Current liabilities $ 23,000 $ 62,000 15,000 $ 77,000 Cash Accounts payable Notes payable Accounts receivable 37,000 Inventory 79,000 Total $139,000 $144,000 Total Long-term debt Owners' equity Fixed assets $100,000 Net plant and equipment Common stock and paid-in surplus $375,000 Retained earnings 193,000 Total $293,000 Total liabilities and owners' equity $514,000 $514,000 Total assets
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 85% (7 reviews)
The pro forma income statements for all three growth rates will be Under the sustainable growth rate assumption the company maintains a constant debtequity ratio The DE ratio of the company is DE 1440...View the full answer
Answered By
JAPHETH KOGEI
Hi there. I'm here to assist you to score the highest marks on your assignments and homework. My areas of specialisation are:
Auditing, Financial Accounting, Macroeconomics, Monetary-economics, Business-administration, Advanced-accounting, Corporate Finance, Professional-accounting-ethics, Corporate governance, Financial-risk-analysis, Financial-budgeting, Corporate-social-responsibility, Statistics, Business management, logic, Critical thinking,
So, I look forward to helping you solve your academic problem.
I enjoy teaching and tutoring university and high school students. During my free time, I also read books on motivation, leadership, comedy, emotional intelligence, critical thinking, nature, human nature, innovation, persuasion, performance, negotiations, goals, power, time management, wealth, debates, sales, and finance. Additionally, I am a panellist on an FM radio program on Sunday mornings where we discuss current affairs.
I travel three times a year either to the USA, Europe and around Africa.
As a university student in the USA, I enjoyed interacting with people from different cultures and ethnic groups. Together with friends, we travelled widely in the USA and in Europe (UK, France, Denmark, Germany, Turkey, etc).
So, I look forward to tutoring you. I believe that it will be exciting to meet them.
3.00+
2+ Reviews
10+ Question Solved
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th Edition
Authors: Stephen A. Ross, Randolph W. Westerfield, Bradford D.Jordan
Question Posted:
Students also viewed these Corporate Finance questions
-
Redo Problem 26 using sales growth rates of 30 and 35 percent in addition to 20 percent. Illustrate graphically the relationship between EFN and the growth rate, and use this graph to determine the...
-
Redo Problem 23 using sales growth rates of 30 and 35 percent in addition to 20 percent. Illustrate graphically the relationship between EFN and the growth rate, and use this graph to determine the...
-
Redo Problem 23 using sales growth rates of 30 and 35 percent in addition to 20 percent. Assume the company wishes to keep its debt-equity ratio constant. Illustrate graphically the relationship...
-
ABC Corporation purchased a residential property for the use of its Accounting Manager. The property is payable over 12 annual installments of P275,000 including interest but have a cash price of...
-
The downward force produced by the quadriceps muscles during the power stroke of bicycle-pedaling motion is shown in FIGURE 11-67 as a function of the crank angle (see Figure 11-39). The force from...
-
Suppose that the actual amount of instant coffee that a filling machine puts into 6-ounce jars is a random variable having a normal distribution with = 0.05 ounce. If only 3 percent of the jars are...
-
A contingency table containing observed values has four rows and five columns. The value of the chi-square statistic for testing independence is 22.87. Is H0 rejected at the = 0.05 level?
-
Why are value-added activities defined from a customer viewpoint?
-
Question 1 (a) Helen Ong (Helen) runs a hairdressing business from her home and the business has expanded, with revenue now reaching RM40,000 per year. Helen is considering moving her business to a...
-
Wedding Planners Limited (WP), owned by Anne and Francois Tremblay, provides wedding planning and related services. WP owns a building (the Pavilion) that has been custom-made for hosting weddings....
-
EFN and Internal Growth Redo Problem 25 using sales growth rates of 15 and 25 percent in addition to 20 percent illustrate graphically the relationship between EFN and the growth rate, and use this...
-
Constraints on Growth Let Me Be, Inc., wishes to maintain a growth rate of 14 percent per year and a debtequity ratio of .25 Profit margin is 5.9 percent, and the ratio of total assets to sales is...
-
Exercise 13.35 describes a simulation exercise. Which of the following is the best explanation for the process described? a. This process allows researchers to compare the actual result to what could...
-
Black and Blue Ltd depreciates its forklift trucks using a reducing balance rate of 30 percent. Its accounting year end is 30 September. On 30 September 2017, it owned four forklift trucks: (A)...
-
A company maintains its non-current assets at cost. A provision for depreciation account is used for each type of asset. Machinery is to be depreciated at the rate of 15 per cent per annum, and...
-
A company which makes up its financial statements annually to 31 December, provides for depreciation of its machinery at the rate of 12 per cent per annum using the reducing balance method. On 31...
-
Arthur deals in bicycles. His business position at 1 October was as follows: Capital 3,369 Inventory 306 (3 x Model A bicycles @ 54 and 3 x Model B @ 48) Balance at bank 3,063 Having established good...
-
J. Philip started in business on 1 January 2015 with 60,000 in a bank account. Unfortunately, he did not keep proper books of account. He must submit a calculation of profit for the year ending 31...
-
Why should entrepreneurs use a model to perform valuations? What about investors?
-
A sprinkler head malfunctions at midfield in an NFL football field. The puddle of water forms a circular pattern around the sprinkler head with a radius in yards that grows as a function of time, in...
-
The accompanying table provides the identity of the two naturally occurring isotopes for four elements and theatomic weights for those elements. (In each case, the two isotopes differ in mass number...
-
Info Systems Technology (IST) manufactures microprocessor chips for use in appliances and other applications. IST has no debt and 100 million shares outstanding. The correct price for these shares is...
-
Info Systems Technology (IST) manufactures microprocessor chips for use in appliances and other applications. IST has no debt and 100 million shares outstanding. The correct price for these shares is...
-
What is the most important difference between a corporation and all other organizational forms?
-
You are the Business Analyst on the myCHC project and you want to begin this initiative with the tasks listed under the Business Analysis Planning and Monitoring Knowledge area. Please explain the...
-
How do various credit scoring models, like FICO and VantageScore, impact the approval process for mortgage loans, and what is the significance of credit risk in determining interest rates and other...
-
1. Conduct consumer and market research based on which construct the House of Quality (QFD) for a Suitcase. i. Consider the development of Suitcase design using House of Quality (QFD) template ....
Study smarter with the SolutionInn App