Question
Narrow Falls Lumber has total assets of $913,600, total debt of $424,500, net sales of $848,600, and net income of $94,000. The tax rate is
Narrow Falls Lumber has total assets of $913,600, total debt of $424,500, net sales of $848,600, and net income of $94,000. The tax rate is 21 percent and the dividend payout ratio is 30 percent. What is the firm's sustainable growth rate? Assuming all external funds will come from debt, will the firms debt-equity ratio change if it grows at the sustainable growth rate? (Hint: Need to compute Total Equity, ROE, and the fraction reinvested. Choose closest answer if necessary).
Group of answer choices:
A. 15.54 percent; Decrease
B. 15.54 percent; Constant
C. 6.12 percent; Increase
D. 6.12 percent; Constant
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started