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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Abbreviated financial statements for Archimedes Levers are shown in the table below. Assume sales and expenses increase by 13% in
2022 and all assets and liabilities increase correspondingly.
Income Statement
Sales
Costs, including interest
Net income
$ 6,800
4,900
$ 1,900
2021
Balance Sheet, Year-End
2020
Net assets
$ 5,916 $ 5,500
Total
$ 5,916 $ 5,500
Debt
Equity
Total
2021
$ 2,516
3,400
$ 5,916
2020
$ 2,433
3,067
$ 5,500
a. If the payout ratio is set at 60% and no external debt or equity is to be issued, what is the maximum possible growth rate for
Archimedes?
b. If the payout ratio is set at 60% and the firm maintains a fixed debt ratio but issues no equity, what is the maximum possible
growth rate for Archimedes?
Note: For all requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
a. Maximum possible growth rate
b. Maximum possible growth rate
%
%
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Transcribed Image Text:Abbreviated financial statements for Archimedes Levers are shown in the table below. Assume sales and expenses increase by 13% in 2022 and all assets and liabilities increase correspondingly. Income Statement Sales Costs, including interest Net income $ 6,800 4,900 $ 1,900 2021 Balance Sheet, Year-End 2020 Net assets $ 5,916 $ 5,500 Total $ 5,916 $ 5,500 Debt Equity Total 2021 $ 2,516 3,400 $ 5,916 2020 $ 2,433 3,067 $ 5,500 a. If the payout ratio is set at 60% and no external debt or equity is to be issued, what is the maximum possible growth rate for Archimedes? b. If the payout ratio is set at 60% and the firm maintains a fixed debt ratio but issues no equity, what is the maximum possible growth rate for Archimedes? Note: For all requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. a. Maximum possible growth rate b. Maximum possible growth rate % %
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