Assets and costs are proportional to sales. Debt and equity are not. A dividend of $2,907 was paid, and the company wishes to maintain a constant payout ratio. Next year’s sales are projected to grow by 25%.
1. What is the pro-forma value for equity? (Round answer to 2 decimal places. Do not round intermediate calculations. Also, do not calculate the numbers given in the income statement and balance sheet, such as the Taxes and Net income. Take them as given.).
2. What is the external financing needed using the pro-forma approach? (Round answer to 2 decimal places. Do not round intermediate calculations. Also, do not calculate the numbers given in the income statement and balance sheet, such as the Taxes and Net income. Take them as given.).
3. What is the internal growth rate? (Report answer in percentage terms and round to 2 decimal places. Do not round intermediate calculations).
4. What is the sustainable growth rate? (Report answer in percentage terms and round to 2 decimal places. Do not round intermediate calculations).
Homework Answers
Answer 1:
Pro-forma value for equity = Equity Previous year + Profit margin ratio * Sales previous year * (1 + 25%) * (1 - dividend payout ratio)
= 170809 + (18303 / 73802) * 73802 * (1 + 25%) * (1 - 2907 /18303)
= $190,054.00
Pro-forma value for equity = $190,054.00
Answer 2:
Pro-forma asset = (Asset previous year / Sales previous year) * (Sales previous year * (1 + 25%))
= (209087 / 170809) * (170809 *(1 + 25%)
= $261,358.75
External financing needed = Pro-forma asset + Debt - Pro-forma equity = 261358.75 - 38278 - 190054 = $33,026.75
Calculations are also given below:
External financing needed = $33,026.75
Answer 3:
Internal growth rate = RoA * Retention ratio
= Net Income / Assets * (1 - dividend payout ratio)
= 18303 /209087 * (1 - 2907 /18303)
= 7.36%
Internal growth rate = 7.36%
Answer 4:
Sustainable growth rate = RoE * Retention ratio
= Net Income / Equity * (1 - dividend payout ratio)
= 18303 /170809 * (1 - 2907 /18303)
= 9.01%
Sustainable growth rate = 9.01%
Add Answer to:
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(Round answer to 2 decimal places. Do not round intermediate
calculations. Also, do not calculate the numbers given in the
income statement and balance sheet, such as the Taxes and Net
income. Take them as given.).
2. What is the external financing needed using the
pro-forma approach? (Round answer to 2 decimal places. Do
not round intermediate calculations. Also, do not calculate the
numbers given in the income statement and balance sheet,...
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1. What is the pro-forma value for equity?
(Round answer to 2 decimal places. Do not round intermediate
calculations. Also, do not calculate the numbers given in the
income statement and balance sheet, such as the Taxes and Net
income. Take them as given.).
2. What is the external financing needed using the
pro-forma approach? (Round answer to 2 decimal places. Do
not round intermediate calculations. Also, do not calculate the
numbers given in the income statement and balance sheet,...
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1. What is the pro-forma value for equity?
(Round answer to 2 decimal places. Do not round intermediate
calculations. Also, do not calculate the numbers given in the
income statement and balance sheet, such as the Taxes and Net
income. Take them as given.).
2. What is the external financing needed using the
pro-forma approach? (Round answer to 2 decimal places. Do
not round intermediate calculations. Also, do not calculate the
numbers given in the income statement and balance sheet,...
1. What is the pro-forma value for equity?
(Round answer to 2 decimal places. Do not round intermediate
calculations. Also, do not calculate the numbers given in the
income statement and balance sheet, such as the Taxes and Net
income. Take them as given.).
2. What is the external financing needed using the
pro-forma approach? (Round answer to 2 decimal places. Do
not round intermediate calculations. Also, do not calculate the
numbers given in the income statement and balance sheet,...
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Please, please, please adhere to the rounding
instructions (written in red), or the answer will be wrong.
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