Eagle Sports Supply has the following financial statements. Assume that Eagle’s assets are proportional to its sales. INCOME STATEMENT, 2019 Sales $ 900 Costs 170 Interest 50 Taxes 120 Net income $ 560 BALANCE SHEET, YEAR-END   2018 2019   2018 2019 Assets $ 3,150 $ 3,450 Debt $ 1,050 $ 1,150       Equity 2,100 2,300 Total $ 3,150 $ 3,450 Total $ 3,150 $ 3,450 What is the internal growth rate of Eagle Sports if the dividend payout ratio is fixed at 60% and the equity-to-asset ratio is fixed at 2/3? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. What is the sustainable growth rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question
100%

Eagle Sports Supply has the following financial statements. Assume that Eagle’s assets are proportional to its sales.

INCOME STATEMENT, 2019
Sales $ 900
Costs 170
Interest 50
Taxes 120
Net income $ 560
BALANCE SHEET, YEAR-END
  2018 2019   2018 2019
Assets $ 3,150 $ 3,450 Debt $ 1,050 $ 1,150
      Equity 2,100 2,300
Total $ 3,150 $ 3,450 Total $ 3,150 $ 3,450
  1. What is the internal growth rate of Eagle Sports if the dividend payout ratio is fixed at 60% and the equity-to-asset ratio is fixed at 2/3?

    Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

  2. What is the sustainable growth rate?

    Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 2 images

Blurred answer
Knowledge Booster
Financial Statements
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education