The Green Giant has a 6 percent profit margin and a 65 percent dividend payout ratio....

The Green Giant has a 6 percent profit margin and a 65 percent dividend payout ratio. The total asset turnover is 1.5 and the equity multiplier is 1.6. What is the sustainable rate of growth?

Expert Solution

ROE = (PM)(TAT)(EM)

ROE = (.06)(1.5)(1.6)

ROE = 0.144 or 14.4%

The plowback ratio is one minus the dividend payout ratio, so:

b = 1 – 0.65

b = 0.35

Sustainable growth rate = (ROE × b) / [1 – (ROE × b)]

Sustainable growth rate = [0.144(0.35)] / [1 – 0.144(0.35)]

Sustainable growth rate = 0.0531 or 5.31%

jeff jeffy answered 2 years ago

The Green Giant has a 7 percent profit margin and a 38 percent dividend payout ratio....

The Green Giant has a 7 percent profit margin and a 38 percent dividend payout ratio. The total asset turnover is 1.3 times and the equity multiplier is 1.4 times. What is the sustainable rate of growth? A. 12.01% B. 8.58% C. 9.88% D. 12.74% E. 1.82%

Assume a company has a payout ratio of 42 percent, a profit margin of 7 percent,...

Assume a company has a payout ratio of 42 percent, a profit margin of 7 percent, a cost of equity of 15 percent and a growth rate of 3.5 percent. Do not round intermediate calculations. Round your answers to three decimal places. What is the forward price–sales multiple? What is the trailing price–sales multiple?

your firm has a constant profit margin of 5 percent and adividend payout ratio of...

your firm has a constant profit margin of 5 percent and a dividend payout ratio of 35 percent. currently, sales, net income, and retained earnings are 27400, 2350, 4400, respectively. if sales are expected to rise by 5 percent next year, what will be the pro forma retained earnings?A) 5264 B) 5721 C )6004 D) 1604 E) 864

1. TYU Inc. has a profit margin of 8.3 percent and a payout ratio of 42...

1. TYU Inc. has a profit margin of 8.3 percent and a payout ratio of 42 percent. The firm has annual sales of $386,400, current liabilities of $37,200, long-term debt of $123,800, and net working capital of $16,700, and net fixed assets of $391,500. No external equity financing is possible. What is the internal growth rate? 2. Jump Company., has annual sales of $40,934, depreciation of $3,100, interest paid of $750, cost of goods sold of $22,400, taxes of $3,084, and...

*Socal Engineering has a 5% profit margin and a 0.6 dividend payout ratio. The total asset...

*Socal Engineering has a 5% profit margin and a 0.6 dividend payout ratio. The total asset turnover is 1.40 and the equity multiplier is 2.0. What is the sustainable rate of growth? How the SGR will be changed if the company changes its dividend policy and pays only 40% of the net income as dividend? The Adam Company has sales of $498,000, cost of goods sold of $263,000, and accounts receivable of $50,000. How long on average does it take...

6. Suppose the Price/Earnings Ratio for the S&P 500 is 20 and the dividend payout ratio...

6. Suppose the Price/Earnings Ratio for the S&P 500 is 20 and the dividend payout ratio of the S&P 500 is 30%. The future growth rate of dividends is expected to be 3%. a. Use Goal Seek or Solver to determine the dividend payout ratio that would yield an expected Market return of 6%.

9. Last year, a firm had a ROA of 14.5 percent and a dividend payout ratio...

9. Last year, a firm had a ROA of 14.5 percent and a dividend payout ratio of 35 percent. What is the firm’s internal growth rate? A. 33.33% B. 25.40% C. 19.05% D. 13.64% E. 10.41% 10. In 2014, Umbrellas Unlimited, Inc. had an ROE of 18.5 percent and a dividend payout ratio of 40 percent. What is the sustainable growth rate? A. 19.76% B. 13.17% C. 12.49% D. 10.99% E. 10.12% 14. In 2015, Burgundy Shoes, Inc. had net...

If A7X Co. has an ROA of 13 percent and a payout ratio of 16 percent,...

If A7X Co. has an ROA of 13 percent and a payout ratio of 16 percent, what is its internal growth rate?

SUBJECT 3 a. A company with a dividend payout ratio of 40% for 2018, has a...

SUBJECT 3 a. A company with a dividend payout ratio of 40% for 2018, has a ROE of 10%. The dividends and stock’s earnings are expected to grow at the same rate. The current year earnings per share are 7 euros and the company has a beta coefficient of 1. The risk-free rate is 6% and analysts estimate that the market risk premium is 5%. Taking into account the above information, estimate: I. The expected growth rate, and its P/E...

Gwen's Pastry Shop has annual sales of $238,000, a profit margin of 6 percent, and a...

Gwen's Pastry Shop has annual sales of $238,000, a profit margin of 6 percent, and a return on assets of 7.7 percent. The firm has in total assets.

Question