"O Your company would like to determine the growth rate in sales that will allow it to expand as much as possible without having to issue external capital (that is, its AFN will be equal to 0). Assume that you have gathered the data listed below for the firm. Given this information, and using the AFN formula, determine the maximum growth rate of sales that the firm can sustain without having to issue external capital. Capital Intensity Ratio = 1.25 ■ Profit Margin = 7% ■ Dividend Payout Ratio = 20% Current Sales = $200,000 Spontaneous Liabilities = $40,000 ○ 4.79% O 5.63% O 3.96% O 7.36% ○ 6.49%

"O Your company would like to determine the growth rate in sales that will allow it to expand as much as possible without having to issue external capital (that is, its AFN will be equal to 0). Assume that you have gathered the data listed below for the firm. Given this information, and using the AFN formula, determine the maximum growth rate of sales that the firm can sustain without having to issue external capital. Capital Intensity Ratio = 1.25 ■ Profit Margin = 7% ■ Dividend Payout Ratio = 20% Current Sales = $200,000 Spontaneous Liabilities = $40,000 ○ 4.79% O 5.63% O 3.96% O 7.36% ○ 6.49%

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter11: Risk-adjusted Expected Rates Of Return And The Dividends Valuation Approach

Section: Chapter Questions

Problem 1AIC

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