Question

2014 14,000 71,632 878,000 715,2001,287,3601,716,480 1,946,8022,680,112 836,840 1,468,8002,886,5923,516,952 Balance Sheets 2012 9,000 48,600 2013 7,282 as Short-term investments Accounts receivable Inventory Total Current Assets Net Fixed Assets Total Assets 351,200 632,160 1,124,0001 344,800 939,790 Accounts payable Notes payable Accruals Total Current Liabilities Long-term debt Common stock Retained earnings 359,800 300,000 380,000 481,6001,328,9601,039,800 500,000 460,0001,680,936 296,216 1,977,152 1,468,8002,886,5923,516,952 145,600 200,000 136,000 324,000 720,000 284,960 323,432 1,000,000 460,000 203,768 663,768 97,632 557,632 Total Liabilities and Equity 2014 3,432,000 5,834,4007,035,600 2,864,0004,980,0005,800,000 120,000 612,960 502,640 80,000 422,640 169,056 253,584 Income Statements 2012 2013 Cost of goods sold Depreciation Other operating expense EBIT Interest expense Earnings before tax Taxes (40%) Net income 18,900 340,000 209,100 62,500 146,600 116,960 720,000 17,440 176,000 -158,560 63,424 95,136 87,960 2014 250,000 0.220 2013 Other Data Stock Price Shares Outstanding 2012 100,000 0.880 0.220 100,000 (0.951) 0.110 DPS Tax Rate Book value per share Lease Payments WACC (cost of capital) 7.909 40,000 40,000

a) What is the retention ratio for 2012, 2013, and 2014?

b) What is the sustainable growth rate for 2012, 2013, and 2014?

c) what is the actual growth rate for 2013 and 2014?

d) what is the equity multiplier for 2012, 2013, and 2014?

Please show formulas.

Answer 1

	2012	2013	2014
EPS	0.88	-0.951	1.014
DPS	0.22	0.11	0.22
Retention Ratio	75.00%	111.57%	78.30%
Net Income	87,960	-95,136	253,584
Equity	663,768	557,632	1,977,152
ROE	13.3%	-17.1%	12.8%
SGR	9.94%	-19.03%	10.04%
Growth		70.0%	20.6%
Equity Multiplier	2.21	5.18	1.78

Retention Ratio (RR) = 1 - Dividend Paid / Income = 1 - DPS / EPS

Sustainable growth rate (SGR) = ROE x RR, where ROE = Net Income / Equity

Actual Growth rate = Revenues (2013) / Revenues (2012) - 1

Equity Multiplier = Assets / Equity