Question
Local produce, a company selling locally sourced food products had a net income of $6,000 on sales of $150,000 last year. The firm paid dividends
Local produce, a company selling locally sourced food products had a net income of $6,000 on sales of $150,000 last year. The firm paid dividends of $2,000. Total assets at the end of last year were $400,000, of which $100,000 was financed by debt.
A) what is the sustainable growth rate?
B) If the firm grows at it's sustainable growth rate, how much debt will have to be raised in the coming year? Confirm that the firm maintains its current debt/asset ratio.
C) What would be the maximum possible growth rate if the firm did not sell any new debt or equity in the coming year?
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
