Ramble On Co. wishes to maintain a growth rate of 12 percent per year, a debt-equity...

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Ramble On Co. wishes to maintain a growth rate of 12 percent per year, a debt-equity ratio of.90, and a dividend payout ratio

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Answer 1

Answer #1

g = (1 - b)(ROE)

0.12 = (1 - 0.25)ROE

ROE = 16.00%

Profit Margin = Net Profit/Sales

Sales = Total Assets/0.85

Equity = 1/(1.90)Assets

Assets = Equity(1.90)

Profit Margin = (0.85)Net Profit/[Equity(1.90)]

Profit Margin = (0.85/1.90)(ROE)

Profit Margin = 7.16%

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Answer 2

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