Question

Consider the following information for Kaleb's Kickboxing: |

Profit margin | 8% |

Capital intensity ratio | 0.59 |

Debt–equity ratio | 0.59 |

Net income | $23,000 |

Dividends | $15,640 |

Required: |

Calculate the sustainable growth
rate? (Do not round your intermediate
calculations.) |

Answer #1

Sustainable Growth Rate = ROE * (1 - Dividend Payout Ratio)

Profit margin = Net Income/Sales

=> Sales = $23,000/8% = $287,500

Capital Intensity Ratio = Assets/Sales

Assets = 0.59 * 287,500 = $169,625

Debt/Equity Ratio = 0.59

Debt/(Debt + Equity) = 0.59/(0.59 + 1) = 37.11%

Equity/(Equity+Debt) = 1-37.11% = 62.89%

Now, remeber based on accountancy principles, assets = equity + debt

=> Equity = 62.89% * 169,625 = **106,682.39**

Dividend Payout Ratio = Dividends/Net Income = 15640/23000 = 68%

ROE = 23,000/106,682.39 = 21.56%

Hence, sustainable growth rate = 21.56% * (1 - 68%) =
**6.89%**

Consider the following
information for Kaleb's Kickboxing:
Profit margin
9.9%
Capital intensity
ratio
0.55
Debt–equity
ratio
0.58
Net income
$29,000
Dividends
$20,300
Required:
Calculate the sustainable growth
rate?

You are given the following information on Kaleb's
Kickboxing:
Profit margin 7%
Capital intensity ratio 0.7
Debt–equity ratio 0.8
Net income $80061
Dividends $16694
Calculate the sustainable growth rate (in %) (round 4 decimal
places)

You are given the following information on Kaleb's
Kickboxing:
Profit margin 9%
Capital intensity ratio 0.7
Debt–equity ratio 0.7
Net income $97767
Dividends $16405
Calculate the sustainable growth rate (in %).
(Enter your answer as a percentage, omit the "%" sign in
your response, and round your answer to 4 decimal places. For
example, 1.23456% should be entered as 1.2346)

You are given the following information on Kaleb's Heavy
Equipment:
Profit margin
5.1
%
Capital intensity ratio
.60
Debt-equity ratio
.6
Net income
$
50,000
Dividends
$
13,200
Calculate 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.)

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Supply:
Profit margin 6.7 %
Capital intensity ratio .76
Debt–equity ratio .9
Net income $ 82,000
Dividends $ 16,400
Calculate the sustainable growth rate.

Profit margin
=
10.3
%
Capital intensity ratio
=
.64
Debt−equity ratio
=
.79
Net income
=
$
114,000
Dividends
=
$
53,500
Based on the above information, calculate the sustainable growth
rate for Southern Lights Co. (Do not round intermediate
calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.)
Sustainable growth rate
%

ou are given the following information on Kaleb’s Heavy
Equipment: Profit margin 7.3 % Capital intensity ratio .80
Debt-equity ratio .95 Net income $ 73,000 Dividends $ 24,000
Calculate 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 You have located the
following information on Rock Company: debt ratio = 44.5%, capital
intensity ratio = 2.43 times, profit margin = 17%, and dividend
payout ratio = 34%. What is the sustainable growth rate for Rock?
(Do not round intermediate steps.)

Profit Margin and Debt Ratio
Assume you are given the following relationships for the Haslam
Corporation:
Sales/total assets
1.3
Return on assets (ROA)
4%
Return on equity (ROE)
5%
Calculate Haslam's profit margin and liabilities-to-assets
ratio. Do not round intermediate calculations. Round your answers
to two decimal places.
Profit margin: %
Liabilities-to-assets ratio: %
Suppose half of its liabilities are in the form of debt.
Calculate the debt-to-assets ratio. Do not round intermediate
calculations. Round your answer to two decimal places.
%

You are given the following information for Hendrix Guitars,
Inc.
Profit margin
6.7
%
Total asset
turnover
1.7
Total debt
ratio
.48
Payout ratio
25
%
Calculate 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.)

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