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A firm wishes to maintain an internal growth rate of 9.1 percent and a dividend payout...

A firm wishes to maintain an internal growth rate of 9.1 percent and a dividend payout ratio of 40 percent. The current profit margin is 8.9 percent, and the firm uses no external financing sources.

What must total asset turnover be? (round 4 decimal places)

Solutions

Expert Solution

Internal Growth Rate = (1 - Dividend Payout)(ROA)

ROA = 0.091/(1 - 0.40)

ROA = 15.17%

Asset Turnover = (Sales/Assets)

Asset Turnover = (Sales/Net Profit)(Net Profit/Assets)

Asset Turnover = ROA/Net Profit Margin

Asset Turnover = 0.1517/0.089

Asset Turnover = 1.70

jeff jeffy answered 2 years ago
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