Question

High Flyer, Inc., wishes to maintain a growth rate of 15.75 percent per year and a...

High Flyer, Inc., wishes to maintain a growth rate of 15.75 percent per year and a debt–equity ratio of .85. The profit margin is 4.9 percent, and total asset turnover is constant at 1.09.
  
What is the dividend payout ratio? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
  

Dividend payout ratio             %
  
What is the maximum sustainable growth rate for this company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
  

Sustainable growth rate             %

Homework Answers

Answer #1

ROE =(Profit margin)*(Total asset turnover)*(Equitymultiplier)

=4.9%*(1.09)*(1+.85)

=9.88%

Sustainable growth rate= [(ROE)(b)] / [1 – (ROE)(b)

Sustainable growth rate =15.75%

b=retention ratio

Payout ratio =1-b

=15.75%=(9.88%*b)/[1 – (9.88%)(b)

b= 1.377218

Dividend Payoutratio= 1 – 1.377218 =-37.71%

dividend payout ratio is negative which is impossible growth rate is inconsistent with the other constraints

The lowest possible payout rate is zero, which correspondsto a retention ratio of one

The maximum sustainable growth rate for this company is

= [(ROE)(b)] / [1 – (ROE)(b)]

= [0.0988(1)] / [1 – 0.0988(1)]

Sustainable growth rate =10.96%

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Sig, Inc., wishes to maintain a growth rate of 13 percent per year and a debt-equity...
Sig, Inc., wishes to maintain a growth rate of 13 percent per year and a debt-equity ratio of .3. The profit margin is 7 percent, and the ratio of total assets to sales is constant at 1.67. What dividend payout ratio is necessary to achieve this growth rate under these constraints? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to the nearest whole number, e.g.,...
Fulkerson Manufacturing wishes to maintain a sustainable growth rate of 8.5 percent a year, a debt–equity...
Fulkerson Manufacturing wishes to maintain a sustainable growth rate of 8.5 percent a year, a debt–equity ratio of .53, and a dividend payout ratio of 26 percent. The ratio of total assets to sales is constant at 1.22.    What profit margin must the firm achieve in order to meet its growth rate goal? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)    Profit margin             %
Fulkerson Manufacturing wishes to maintain a sustainable growth rate of 8.5 percent a year, a debt–equity...
Fulkerson Manufacturing wishes to maintain a sustainable growth rate of 8.5 percent a year, a debt–equity ratio of .53, and a dividend payout ratio of 26 percent. The ratio of total assets to sales is constant at 1.22.    What profit margin must the firm achieve in order to meet its growth rate goal? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)    Profit margin             %
Fulkerson Manufacturing wishes to maintain a sustainable growth rate of 10 percent a year, a debt–equity...
Fulkerson Manufacturing wishes to maintain a sustainable growth rate of 10 percent a year, a debt–equity ratio of .37, and a dividend payout ratio of 34 percent. The ratio of total assets to sales is constant at 1.38.    What profit margin must the firm achieve in order to meet its growth rate goal? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)    Profit margin             %
Suprenuk, Inc., wishes to maintain a growth rate of 14 percent per year and a debt-equity...
Suprenuk, Inc., wishes to maintain a growth rate of 14 percent per year and a debt-equity ratio of .4. Profit margin is 7.2 percent and the ratio of total assets to sales is constant at 1.69.    What dividend payout ratio is necessary to achieve this growth rate under these constraints? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)...
Suprenuk, Inc., wishes to maintain a growth rate of 15 percent per year and a debt-equity...
Suprenuk, Inc., wishes to maintain a growth rate of 15 percent per year and a debt-equity ratio of .6. Profit margin is 6.3 percent and the ratio of total assets to sales is constant at 1.60.    What dividend payout ratio is necessary to achieve this growth rate under these constraints? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)...
A firm wishes to maintain an internal growth rate of 9.75 percent and a dividend payout...
A firm wishes to maintain an internal growth rate of 9.75 percent and a dividend payout ratio of 43 percent. The current profit margin is 6.5 percent and the firm uses no external financing sources. What must total asset turnover be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
You’ve collected the following information about Sully, Inc.: Profit margin = 4.43 % Total asset turnover...
You’ve collected the following information about Sully, Inc.: Profit margin = 4.43 % Total asset turnover = 3.40 Total debt ratio = .26 Payout ratio = 28 % What is the sustainable growth rate for the company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)    Sustainable growth rate              %    What is the ROA? (Do not round intermediate calculations and enter your answer as a percent rounded to...
A firm wishes to maintain an internal growth rate of 8.5 percent and a dividend payout...
A firm wishes to maintain an internal growth rate of 8.5 percent and a dividend payout ratio of 43 percent. The current profit margin is 9 percent, and the firm uses no external financing sources. What must total asset turnover be? (Enter your answer rounded to 4 decimal places. For example, 1.23456 should be entered as 1.2346)
A. Hodgkiss Mfg., Inc., is currently operating at only 92 percent of fixed asset capacity. Current...
A. Hodgkiss Mfg., Inc., is currently operating at only 92 percent of fixed asset capacity. Current sales are $780,000. How fast can sales grow before any new fixed assets are needed? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) B. Ramble On Co. wishes to maintain a growth rate of 11 percent per year, a debt-equity ratio of 1.3, and a dividend payout ratio of 35 percent. The ratio...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT