Answered step by step
Verified Expert Solution
Question
1 Approved Answer
thank you in advance 2. EBIT/Sales = 15%, Sales/Assets = 2.0, Assets/Equity = 2.0, the dividend payout ratio = 10%, the interest rate on debt
thank you in advance
2. EBIT/Sales = 15%, Sales/Assets = 2.0, Assets/Equity = 2.0, the dividend payout ratio = 10%, the interest rate on debt = 10%, and the tax rate = 40%. a. What is the sustainable growth rate? b. How does the sustainable growth rate change in response to reducing any of the above ratios or percentages by one-half (e.g., EBIT/Sales = 7.5%)? How does the sustainable growth rate change in response to increasing any of the above ratios or percentages by one-half (e.g., EBIT/Sales = 22.5%)? d. Do some changes have greater impact on the sustainable growth rate than others? Are the effects linear or nonlinear? Explain your findings. C. 2. EBIT/Sales = 15%, Sales/Assets = 2.0, Assets/Equity = 2.0, the dividend payout ratio = 10%, the interest rate on debt = 10%, and the tax rate = 40%. a. What is the sustainable growth rate? b. How does the sustainable growth rate change in response to reducing any of the above ratios or percentages by one-half (e.g., EBIT/Sales = 7.5%)? How does the sustainable growth rate change in response to increasing any of the above ratios or percentages by one-half (e.g., EBIT/Sales = 22.5%)? d. Do some changes have greater impact on the sustainable growth rate than others? Are the effects linear or nonlinear? Explain your findings. CStep 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