Question

The most recent financial statements for Schenkel Co. are shown here: Income Statement Sales $ 17,600 Costs 12,000 Current assets Fixed assets Balance Sheet $10,700 Debt 25,750 Equity $ 15,200 21,250 Taxable income $ 5,600 Total $36,450 Total $36,450 Taxes (40%) 2.240 Net income $ 3,360 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 40 percent dividend payout ratio. No external equity financing is possible. What is the sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Sustainable growth rate

Answer 1

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121 e 39 VIA 3 08.37 ENG 13 01 2020 H5360 - X fx HGHH HH HK SCHENKEL HL HM HN HO HP HQ HR HSHT HU HV ROE = NET INCOME/EQUITY * 100 ROE = 3360/21250 = 15.8118% DIVIDEND PAYOUT RATIO = SO RETENTION RATIO (b)= 40% 60% 343 344 345 346 347 348 349 350 351 352 353 354 355 356 SUSTAINABLE GROWTH RATE = (ROE*b)/(1-ROE*b) SUSTAINABLE GROWTH RATE = (15.8118%*0.60)/(1-(15.8118%*0.60)) ANSWER SUSTAINABLE GROWTH RATE = 10.48% ALEXANDER WE HAVE TO CALCULATE HERE FIRST SUSTAINABLE GROWTH RATE FOR SUSTAINABLE GROWTH RATE, WE NEED ROE & RETENTION RATIO 357 358 359 360 ROE = NET INCOME/EQUITY * 100 ROE = 7920/60500 = 13.0909% DIVIDEND PAYOUT RATIO = SO RETENTION RATIO (b)= 40% 60% SUSTAINABLE GROWTH RATE = (ROE*b)/(1-ROE*b) SUSTAINABLE GROWTH RATE = (13.0909%*0.60)/(1-(13.090%*0.60)) SUSTAINABLE GROWTH RATE = 8.52407% 365 366 367 368 369 370 371 2 THEREFORE MAXIMUM DOLLAR INCREASE IN SALES = 50000*(8.52407%) = 4262.036 ANSWER ANSWER: MAXIMUM INCREASE IN SALES 4262.04 YIELD SPOT Sheelz AFN BANKING NOTE 51 53 CLEAN PRICE 510 BIDDING, UNDERWRITING EUAC AW LIFELP, IP, MRP, INFLATION WARRANT relund 54 55 ... :7