Question

In: Finance

Co. wishes to maintain a growth rate of 11 percent a year, adebt–equity ratio of...

Co. wishes to maintain a growth rate of 11 percent a year, a debt–equity ratio of 1.7, and a dividend payout ratio of 30 percent. The ratio of total assets to sales is constant at 0.7.

What profit margin must the firm achieve? (in %) (round 4 decimals)

Solutions

Expert Solution

Growth Rate = ROE * Retention Ratio

0.11 = ROE * (1-0.30)

ROE = 0.11 / 0.70

ROE = 15.71%

Equity Multiplier = 1+ Debt Equity Ratio

= 1 + 1.7

= 2.7

Total Assets Turnover Ratio 0.70

As per Du Pont Analysis


ROE = Profit Margin * Assets Turnover Ratio * Equity multiplier

= 15.71% * 0.70 * 2.7

= 29.69%

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Abacus Co. wishes to maintain a growth rate of 14 percent a year, a debt–equity ratio...
Abacus Co. wishes to maintain a growth rate of 14 percent a year, a debt–equity ratio of 1.4, and a dividend payout ratio of 26 percent. The ratio of total assets to sales is constant at 0.8. What profit margin must the firm achieve? (in %) (round 2 decimal places)
McCormac Co. wishes to maintain a growth rate of 8 percent a year, a debt-equity ratio...
McCormac Co. wishes to maintain a growth rate of 8 percent a year, a debt-equity ratio of 0.41, and a dividend payout ratio of 64 percent. The ratio of total assets to sales is constant at 1.29. Required: What profit margin must the firm achieve?
Abacus Co. wishes to maintain a growth rate of 14 percent a year, a debt–equity ratio...
Abacus Co. wishes to maintain a growth rate of 14 percent a year, a debt–equity ratio of 1.3, and a dividend payout ratio of 25 percent. The ratio of total assets to sales is constant at 0.6. What profit margin must the firm achieve? (in %)
Ramble On Co. wishes to maintain a growth rate of 11 percent per year, a debt-equity...
Ramble On Co. wishes to maintain a growth rate of 11 percent per year, a debt-equity ratio of 1.3, and a dividend payout ratio of 35 percent. The ratio of total assets to sales is constant at .85. What profit margin must the firm achieve? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Ramble On Co. wishes to maintain a growth rate of 11 percent per year, a debt-equity...
Ramble On Co. wishes to maintain a growth rate of 11 percent per year, a debt-equity ratio of 1.3, and a dividend payout ratio of 35 percent. The ratio of total assets to sales is constant at .85. What profit margin must the firm achieve? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) maximum sales growth ____%
B. Ramble On Co. wishes to maintain a growth rate of 11 percent per year, a...
B. Ramble On Co. wishes to maintain a growth rate of 11 percent per year, a debt-equity ratio of 1.3, and a dividend payout ratio of 35 percent. The ratio of total assets to sales is constant at .85. What profit margin must the firm achieve? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) C Hodgkiss Mfg., Inc., is currently operating at only 90 percent of fixed asset capacity....
Ramble On Co. wishes to maintain a growth rate of 7 percent a year, a debt-equity...
Ramble On Co. wishes to maintain a growth rate of 7 percent a year, a debt-equity ratio of 0.31, and a dividend payout ratio of 66 percent. The ratio of total assets to sales is constant at 1.27. What profit margin must the firm achieve?
Ramble On Co. wishes to maintain a growth rate of 10 percent a year, a debt-equity...
Ramble On Co. wishes to maintain a growth rate of 10 percent a year, a debt-equity ratio of 0.35, and a dividend payout ratio of 62 percent. The ratio of total assets to sales is constant at 1.33. What profit margin must the firm achieve? A. 13.42% B. 14.55% C. 23.82% D. 23.57% E. 8.17%
Ramble On Co. wishes to maintain a growth rate of 9 percent a year, a debt-equity...
Ramble On Co. wishes to maintain a growth rate of 9 percent a year, a debt-equity ratio of 0.33, and a dividend payout ratio of 62 percent. The ratio of total assets to sales is constant at 1.38. What profit margin must the firm achieve?

Ramble On Co. wishes to maintain a growth rate of 9 percent a year, a debt-equity...
Ramble On Co. wishes to maintain a growth rate of 9 percent a year, a debt-equity ratio of 0.49, and a dividend payout ratio of 56 percent. The ratio of total assets to sales is constant at 1.25. What profit margin must the firm achieve?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT