Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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The financial statements of Eagle Sport Supply are shown in the table below. For simplicity, "Costs" include interest. Assume that Eagle's assets are proportional to its sales. Assume a growth rate of 35% in revenue, expenses, and assets in 2023. The tax rate will remain constant. Sales Income Statement Costs $ 4,350 1,950 Pretax income Taxes (at 30.0%) $ 2,400 720 Net income $ 1,680 2022 Balance Sheet, Year-End 2021 Net assets $ 6,400 $ 6,100 Total $ 6,400 $ 6,100 Debt Equity Total 2022 $ 2,700 3,700 2021 $ 2,600 3,500 $ 6,400 $ 6,100 a. Assume that the dividend payout ratio is fixed at 50% and the equity-to-asset ratio is fixed at two-thirds. What is the internal growth rate for 2023? b. What is the sustainable growth rate for 2023? Note: For all requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. a. Internal growth rate b. Sustainable growth rate % %
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Transcribed Image Text:The financial statements of Eagle Sport Supply are shown in the table below. For simplicity, "Costs" include interest. Assume that Eagle's assets are proportional to its sales. Assume a growth rate of 35% in revenue, expenses, and assets in 2023. The tax rate will remain constant. Sales Income Statement Costs $ 4,350 1,950 Pretax income Taxes (at 30.0%) $ 2,400 720 Net income $ 1,680 2022 Balance Sheet, Year-End 2021 Net assets $ 6,400 $ 6,100 Total $ 6,400 $ 6,100 Debt Equity Total 2022 $ 2,700 3,700 2021 $ 2,600 3,500 $ 6,400 $ 6,100 a. Assume that the dividend payout ratio is fixed at 50% and the equity-to-asset ratio is fixed at two-thirds. What is the internal growth rate for 2023? b. What is the sustainable growth rate for 2023? Note: For all requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. a. Internal growth rate b. Sustainable growth rate % %
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