Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Need help on this question, Just part C (PROFIT MARGIN) Problem 18-21 Sustainable Growth (LO3) A firm has decided that its optimal capital structure is

Need help on this question, Just part C (PROFIT MARGIN)

image text in transcribed

Problem 18-21 Sustainable Growth (LO3) A firm has decided that its optimal capital structure is 100% equity-financed. It perceives its optimal dividend policy to be a 40% payout ratio. Asset turnover is sales/assets = 0.6, the profit margin is 10%, and the firm has a target growth rate of 4%. a-1. Calculate the sustainable growth rate. (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) a-2. Is the firm's target growth rate consistent with its other goals? b. If the firm's target growth rate is not consistent with its other goals, what would asset turnover need to be to achieve its goals? (Do not round intermediate calculations. Round your answer to 3 decimal places.) .c. If the firm's target growth rate is not consistent with its other goals, how high would the profit margin need to be to achieve its goals? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) 5 a-1. 3.6 % a-2. No Sustainable growth rate Is the firm's target growth rate consistent with its other goals? Asset turnover Profit margin b. 0.666 C. %

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

Contemporary Issues In Finance

Authors: Simon Grima, Frank Bezzina, Inna Romanova

1st Edition

1786359073, 978-1786359070

More Books

Students also viewed these Finance questions

Question

At what amount should liabilities generally be reported?

Answered: 1 week ago