Question

Calculate the rate at which a firm can grow without changing its leverage if its payout ratio is 65%, equity outstanding at the beginning of the year is $650,000, and its net income for the year is $130,000. A) 13.00% B) 14.36% C) 35.00% D) 7.00%

Answer 1

Geren data from the problem payout ratio = 65. eautty outstanding of beginning of year $ 650,000 net ancome of ome of year = year $ 130,000 As we have 65.1. of 130,000 = 84,500 25.). Of 130,000 28to 45,500 - 95 65-1. pay out then 35"). W911 add to exesting equity = $650,000 + 45,500 => 695,500 E caurty will encrease by = + 45,500 695,500 = 7.00-). option o, as corech