Questions 1.
The most recent financial statements for Live Co. are shown here:
|
Income Statement
|
Balance Sheet
|
|
Sales
|
$13,250
|
Current assets
|
$10,400
|
Debt
|
$51,000
|
|
Costs
|
9,480
|
Fixed assets
|
28,750
|
Equity
|
21,650
|
|
Taxable income
|
$3,770
|
Total
|
$39,150
|
Total
|
$39,150
|
|
Taxes (34%)
|
1,508
|
|
|
|
|
|
Net income
|
$2,262
|
|
|
|
|
Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 30 percent dividend payout ratio. No external equity financing is possible.
Required:
What is the internal growth rate?
- 4.11%
- 7.89%
- 1.76%
- 4.21%
- 4.31%
Questions 2.
McCormac Co. wishes to maintain a growth rate of 12 percent a year, a debt-equity ratio of 1.20, and a dividend payout ratio of 30 percent. The ratio of total assets to sales is constant at .75.
Required:
What profit margin must the firm achieve?
- 21.65%
- 9.28%
- 12.18%
- 5.47%
- 5.22%
Seaweed Mfg., Inc., is currently operating at only 95 percent of fixed asset capacity. Fixed assets are $440,000. Current sales are $550,000 and projected to grow to $630,000.
Required:
How much in new fixed assets are required to support this growth in sales?
- $38,700
- $38,800
- $64,000
- $38,900
- $39,000
Questions 3.
Assume that the following ratios are constant.
|
Total asset turnover
|
2.50
|
|
Profit margin
|
7.8%
|
|
Equity multiplier
|
1.80
|
|
Payout ratio
|
60%
|
Required:
What is the sustainable growth rate?
- 16.33%
- 16.83%
- -8.56%
- -5.87%
- 26.68%
Questions 4.
The most recent financial statement for Throwing Copper Co. are shown here:
|
Income Statement
|
Balance Sheet
|
|
Sales
|
$42,000
|
Current assets
|
$21,000
|
Long-term debt
|
$51,000
|
|
Costs
|
28,500
|
Fixed assets
|
86,000
|
Equity
|
56,000
|
|
Taxable income
|
$13,500
|
Total
|
$107,000
|
Total
|
$107,000
|
|
Taxes (34%)
|
4,590
|
|
|
|
|
|
Net income
|
$8,910
|
|
|
|
|
Assets and costs are proportional to sales. The company maintains a constant 30 percent dividend payout ratio and a constant debt-equity ratio.
Required:
What is the maximum increase in sales that can be sustained assuming no new equity is issued?
- $5,364.03
- $5,164.03
- $2,105.24
- $5264.03
- $2,599.70
Questions 5.
Consider the following simplified financial statements for the Phillips Corporation (assuming no income taxes):
|
Income Statement
|
Balance Sheet
|
|
Sales
|
$23,000
|
Assets
|
$15,800
|
Debt
|
$5,200
|
|
Costs
|
16,700
|
|
|
Equity
|
10,600
|
|
Net income
|
$6,300
|
Total
|
$15,800
|
Total
|
$15,800
|
Phillips has predicated a sales increase of 15 percent. It has predicated that every item on the balance sheet will increase by 15 percent as well.
Required:
Calculate the dividend paid.
- $5,555
- $5,755
- $5,655
- $4,875
- $5,855
Questions 6.
If the Gamett Corp. has a 15 percent ROE and a 25 percent payout ratio, what is its sustainable growth rate?
- 3.90%
- 12.68%
- 12.78%
- 12.88%
- 12.58%
Questions 7.
A firm wishes to maintain a growth rate of 11.5 percent and dividend payout ratio of 30 percent. The ratio of total assets to sales is constant at .60, and the profit margin is 6.2 percent. If the firm also wishes to maintain a constant debt-equity ratio, what must it be?
- 0.42
- 2.46
- 2.33
- 0.43
- 0.44
Questions 8.
The most recent financial statement for Zoso, Inc., are shown here (assuming no income taxes):
|
Income Statement
|
Balance Sheet
|
|
Sales
|
$6,300
|
Assets
|
$18,300
|
Debt
|
$12,400
|
|
Costs
|
3,890
|
|
|
Equity
|
5,900
|
|
Net Income
|
$2,410
|
Total
|
$18,300
|
Total
|
$18,300
|
Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year's sales are projected to be $7,434.
Required:
What is the external financing needed?
- $450
- $430
- $2,232
- $475
- $470