Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume sales for Peach Street Industries are expected to increase by 8.00% from 2015 to 2016. Peach Street is operating at full capacity currently and

Assume sales for Peach Street Industries are expected to increase by 8.00% from 2015 to 2016. Peach Street is operating at full capacity currently and expected assets-to-sales and spontaneous liabilities-to-sales to remain the same. Additionally, the firm is looking to maintain their 2015 net profit margin and dividend payout ratios for 2016. The firms tax rate is 37.00% and selected income statement and balance sheet information for 2015 is provided below:

Entry Value Entry Value
Current Assets $800.00 Sales $2,500.00
Net Fixed Assets (NFA) $700.00 Operating Costs $2,030.00
Total Assets $1,500.00 Depreciation $90.00
Accounts Payable and Accruals $30.00 Interest Expense $69.00
Notes Payable $180.00 Dividends Paid $93.30
Long term debt $510.00
Total Equity $780.00

The firm is projecting sales growth of 10% from 2015 to 2016. If the firm did not have access to or did not want to use external capital sources to grow sales, what is the maximum rate of sales growth (self-sustaining growth rate) could the firm could achieve under these conditions?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Innovation And Finance

Authors: Andreas Pyka, Hans-Peter Burghof

1st Edition

0415696852, 978-0415696852

More Books

Students also viewed these Finance questions

Question

Networking is a two-way street. Discuss this statement.

Answered: 1 week ago