Question

In: Finance

GrowSustain Inc key information table: Payout Ratio - 0% Net Income - 25 million Beginning Stockholders'...

GrowSustain Inc key information table:

Payout Ratio - 0%

Net Income - 25 million

Beginning Stockholders' Equity - 125 million

Beginning Total Assets - 200 million

End Total Assets - 180 million

Using the information of GrowSustain Inc in the above table, calculate its:

a) Internal growth rate.

b) Sustainable growth rate.

c) Sustainable growth rate if it pays out 20% of its net income as a dividend.

Expert Solution

I have answered the question below

Please up vote for the same and thanks!!!

Do reach out in the comments for any queries

Answer:

=> 25/200 = 12.5%

b)

= 25M/125m = 0.2

C)

1 - 20% = 80%

= 0.8 * 0.2 = 16%

jeff jeffy answered 1 year ago

The state lottery's million-dollar payout provides for $1.4 million to be paid in 25 installments of...

The state lottery's million-dollar payout provides for $1.4 million to be paid in 25 installments of $56,000 per payment. The first $56,000 payment is made immediately, and the 24 remaining $56,000 payments occur at the end of each of the next 24 years. If 6 percent is the discount rate, what is the present value of this stream of cash flows? If 12 percent is the discount rate, what is the present value of the cash flows?

Suppose a firm has a retention ratio of 27 percent and net income of $4.2 million....

Suppose a firm has a retention ratio of 27 percent and net income of $4.2 million. How much does it pay out in dividends? (Enter your answer in dollars not in millions.)

Payout Ratio and Book Value per Share Divac Company has developed a statement of stockholders' equity...

Payout Ratio and Book Value per Share Divac Company has developed a statement of stockholders' equity for the year 2017 as follows: Preferred Stock Paid-In Capital— Preferred Common Stock Paid-In Capital— Common Retained Earnings Balance, Jan. 1 $100,000 $50,000 $400,000 $40,000 $200,000 Stock issued 100,000 10,000 Net income 82,000 Cash dividend -50,000 Stock dividend 10,000 5,000 -15,000 Balance, Dec. 31 $110,000 $55,000 $500,000 $50,000 $217,000 Divac’s preferred stock is $100 par, 8% stock. If the stock is liquidated or redeemed,...

4. The blue company has ROE = 25%; growth in EPS = 4.5%; payout ratio of...

4. The blue company has ROE = 25%; growth in EPS = 4.5%; payout ratio of 35% and investors required return of 12.5%. Calculate the price to book value ratio. If P/BV = 2.5 you will buy_________ you will sell__________ 5.a) If the payout ratio is 35% and net profit margin is 4.5% with a growth rate of 5%, calculate price to sales ratio if you require a 11% return on investment. b) If sales rise by $1.25 per...

Using the information shown, what is the asset turnover ratio? Net Income $500,500 Net Sales $379,000...

Using the information shown, what is the asset turnover ratio? Net Income $500,500 Net Sales $379,000 Current Assets $750,000 Current Libabilities $212,000 Average Assets $875,000

The Wei Corporation expects next year’s net income to be $15 million. The firm’s debt ratio...

The Wei Corporation expects next year’s net income to be $15 million. The firm’s debt ratio is currently 40%. Wei has $12 million of profitable investment opportunities, and it wishes to maintain its existing debt ratio. According to the residual distribution model (assuming all payments are in the form of dividends), how large should Wei’s dividend payout ratio be next year? (10 points)

Your firm has a ROE of 30%, a payout ratio of 70%, $130 million of total...

Your firm has a ROE of 30%, a payout ratio of 70%, $130 million of total stockholders’ equity, and $150 million of total liabilities. If you grow at your sustainable growth rate this year, how much additional debt will you need to issue? What are the advantages and disadvantages of the percent sales method?

A firm has a (net income/taxable income) ratio of 0.8, aleverage ratio of 1.5, a...

A firm has a (net income/taxable income) ratio of 0.8, a leverage ratio of 1.5, a (taxable income/EBIT) of 0.4, an asset turnover ratio of 2, and a return on sales ratio of 10%. What is the firm's ROE?

RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $150,000, a net income of...

RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $150,000, a net income of $15,000, and the following balance sheet: Cash $48,285 Accounts payable $51,330 Receivables 77,430 Notes payable to bank 26,535 Inventories 191,400 Total current liabilities $77,865 Total current assets $317,115 Long-term debt 70,470 Net fixed assets 117,885 Common equity 286,665 Total assets $435,000 Total liabilities and equity $435,000 The new owner thinks that inventories are excessive and can be lowered...

RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $300,000, a net income of...

RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $300,000, a net income of $24,000, and the following balance sheet: Cash $78,000 Accounts payable $71,760 Receivables 101,400 Notes payable to bank 46,800 Inventories 374,400 Total current liabilities $118,560 Total current assets $553,800 Long-term debt 113,100 Net fixed assets 226,200 Common equity 548,340 Total assets $780,000 Total liabilities and equity $780,000 The new owner thinks that inventories are excessive and can be lowered to the point where the current...