Compute the sustainable growth rate for Hazard Co using theinformation on the following ratios for...

Compute the sustainable growth rate for Hazard Co using the information on the following ratios for the company. You may assume the ratios are constant over time. Total asset turnover 1.29 Profit margin 8.9% Equity multiplier 1.7 Payout ratio 61%

Multiple Choice -3.04% 8.24% 13.61% -4.67% 8.44%

Solutions

Expert Solution

The growth rate is computed as shown below:

= (ROE x b) / (1 - ROE x b)

ROE is computed as follows:

= Profit margin x Equity multiplier x Total Asset turnover

= 8.9% x 1.7 x 1.29

= 0.195177

b is computed as follows:

= 1 - payout ratio

= 1 - 0.61

= 0.39

So, the growth rate will be as follows:

= (0.195177 x 0.39) / (1 - 0.195177 x 0.39)

= 0.07611903 / 0.92388097

= 8.24% Approximately

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Using the income statement for Times Mirror and Glass Co., compute the following ratios: TIMES MIRROR...

Using the income statement for Times Mirror and Glass Co., compute the following ratios: TIMES MIRROR AND GLASS Co. Income Statement Sales $ 281,000 Cost of goods sold 169,000 Gross profit $ 112,000 Selling and administrative expense 44,800 Lease expense 17,500 Operating profit* $ 49,700 Interest expense 8,100 Earnings before taxes $ 41,600 Taxes (30%) 16,640 Earnings after taxes $ 24,960 *Equals income before interest and taxes. a.Compute the interest coverage ratio. (Round your answer to 2 decimal places.) ...

Using the income statement for Times Mirror and Glass Co., compute the following ratios: TIMES MIRROR...

Using the income statement for Times Mirror and Glass Co., compute the following ratios: TIMES MIRROR AND GLASS COMPANY Sales $ 244,000 Cost of goods sold 135,000 Gross profit $ 109,000 Selling and administrative expense 47,900 Lease expense 18,200 Operating profit* $ 42,900 Interest expense 8,300 Earnings before taxes $ 34,600 Taxes (30%) 13,840 Earnings after taxes $ 20,760 *Equals income before interest and taxes. a. Compute the interest coverage ratio. (Round your answer to 2 decimal places.) ...

Using the income statement for Times Mirror and Glass Co., compute the following ratios: TIMES MIRROR...

Using the income statement for Times Mirror and Glass Co., compute the following ratios: TIMES MIRROR AND GLASS Co. Income Statement Sales $ 277,000 Cost of goods sold 165,000 Gross profit $ 112,000 Selling and administrative expense 43,200 Lease expense 13,500 Operating profit* $ 55,300 Interest expense 10,100 Earnings before taxes $ 45,200 Taxes (30%) 18,080 Earnings after taxes $ 27,120 *Equals income before interest and taxes. a.Compute the interest coverage ratio. (Round your answer to 2 decimal places.) b.Compute...

Explain the firm’s four key ratios as a predictor of sustainable growth.

Can the sustainable growth rate of a company be greater than the internal growth rate? Explain...

Can the sustainable growth rate of a company be greater than the internal growth rate? Explain why and how.

Calculate the sustainable growth rate for Big Falls Timber given the following information.

Calculate the sustainable growth rate for Big Falls Timber given the following information. Dividend payout ratio is 30%; Tax rate is 21%; Total debt is $424,500 and Total assets are $913600; Profit Margin ratio is 11.08%; and Sales of $848,375.45

In a few paragraphs, please explain the following: Compare the sustainable growth rate with the actual...

In a few paragraphs, please explain the following: Compare the sustainable growth rate with the actual growth rate in sales. From the graph below, what problems did management face over this period? Provide analysis of the calculations listed and why they are necessary. Explain how this data justifies a large raise for the operations manager. 2012 2013 2014 2015 2016 % Profit Margin 6.00 7.00 4.60 5.20 7.20 % Retention Ratio 99.50 100.00 100.00 100.00 100.00 Asset Turnover 1.33 2.02...

1. Use the following financial statements for the XYZ Corporation: What is the Sustainable Growth Rate...

1. Use the following financial statements for the XYZ Corporation: What is the Sustainable Growth Rate for the XYZ Corporation in 2015? Income Statement 2015 Sales $3,000,000 Cost of Goods Sold 2,000,000 Depreciation 300,000 EBIT 700,000 Interest 200,000 Taxable Income 500,000 Taxes (40%) 200,000 Net Income $300,000 Dividends $150,000 Add. to Retained Earnings $150,000 Balance Sheet Assets Liabilities & Owner's Equity 2014 2015 2014 2015 Cash $160,000 $190,000 Accounts Payable $310,000 $330,000 Accounts Receiv. 400,000...

5. For Smith Corp. (above), what is the sustainable growth rate?

For each company, compute the following ratios.

Suppose selected financial data of Target and Wal-Mart for 2020 are presented here (in millions).TargetCorporationWal-MartStores, Inc.Income Statement Data for YearNet sales$65,357$408,214Cost of goods sold45,583304,657Selling and administrative expenses15,10179,607Interest expense7072,065Other income (expense)(94)(411)Income tax expense1,3847,139Net income$ 2,488$ 14,335Balance Sheet Data (End of Year)Current assets$18,424$48,331Noncurrent assets26,109122,375Total assets$44,533$170,706Current liabilities$11,327$55,561Long-term debt17,85944,089Total stockholders’ equity15,34771,056Total liabilities and stockholders’ equity$44,533$170,706Beginning-of-Year BalancesTotal assets$44,106$163,429Total stockholders’ equity13,71265,682Current liabilities10,51255,390Total liabilities30,39497,747Other DataAverage net accounts receivable$7,525$4,025Average inventory6,94233,836Net cash provided by operating activities5,88126,249Capital expenditures1,72912,184Dividends4964,217(a)For each company, compute the following ratios. (Enter free cash flow in millions. Round...

Subjects