ACME Inc. has the following ratios: A0*/ SO 1.3; L0*/S0 = 0.35; profit margin = 0.12; and the dividend payout ratio = 37, or 37%. Sales last year were $85 million. Assuming that these ratios will remain constant, use the AFN equation to determine the firm's self-supporting growth rate-in other words, the maximum growth rate ACME can achieve without having to employ non-spontaneous external funds. (Equation 9-1)

ACME Inc. has the following ratios: A0/ SO 1.3; L0/S0 = 0.35; profit margin = 0.12; and the dividend payout ratio = 37, or 37%. Sales last year were $85 million. Assuming that these ratios will remain constant, use the AFN equation to determine the firm's self-supporting growth rate-in other words, the maximum growth rate ACME can achieve without having to employ non-spontaneous external funds. (Equation 9-1)

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter12: Corporate Valuation And Financial Planning

Section12.6: Additional Funds Needed (afn) Equation Method

Problem 5ST

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