suppose a company's return on invested capital is less than its wacc. what happens to the value of operations if the sales growth increases? Explain your answer

Q: Changes in sales cause changes in profits. Would the profit change associated with sales changes be…

A: Introduction: Operating leverage refers to the application of both fixed and variable costs to make…

Q: What happens to the company’s return on investment (ROI) as sales increase? Explain.

A: Return on investment (ROI) = Net profit / Total assets

Q: If we know that a firm has a net profit margin of 4.5%, total asset turnover of 0.72, and a…

A: Dupont analysis is an evaluation method that determines the three components of return on equity…

Q: Which of the following statements is CORRECT?   a. One drawback of EVA as a performance measure is…

A: The question is related to Economic Value Added. The Economic Value Added (EVA) EVA as a residual…

Q: Which of the following typically is true for profitability ratios? a. Growth stocks have lower price…

A: Profitability ratios are calculated to assess the company's ability to generate incomes relative to…

Q: Would you expect a company in a rapidly growing technological industry to have a high or low…

A: Dividend Payout ratio:   Dividend payout ratio is the ratio between total dividends and the net…

Q: When the company is working at full capacity, the assets in the AFN equation is the total assets…

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…

Q: Could a company’s change in NWC be negative in a given year? (Hint: Yes.) Explain how this might…

A: We begin by looking at the definitions and formula of net working capital and change in net working…

Q: Define the term self-supporting growth rate. What is Hatfield’s self-supporting growth rate? Would…

A: Self supporting growth rate is the maximum possible growth the company can exhibit in terms of its…

Q: Assume that the manager of the club is able to reduce expenses by $2,880 without any change in sales…

A: Return on investment is given as follows:- ROI = (Net operating income/ Average operating assets)…

Q: Would the profit change associated with sales changes be larger or smaller if a firm increased its…

A: Operating leverage refers to fixed cost level associated to the operations of a company. A company…

Q: If a firm wishes to retain the same return on equity when its net profit margin and total asset…

A: Net profit margin is given by profit divided by sales.So decline indicates that net income is…

Q: Show with a formula that describes the average estimatesustainable sales growth. Then, make a clear…

A: Sustainable growth means Growth for the future customers such as petroleum industries advertise…

Q: State if each of the following would increase or decrease AFN.    A high growth rate.  A low…

A: Additional Funds Needed (AFN) is that the amount of cash raised by a corporation to expand its…

Q: How would rising interest rates, that increase the weighted average cost of capital  (WACC) impact…

A: Weighted average cost of capital is the average cost of capital weighted by the proportion of the…

Q: return on investment

A: First option is wrong because the return on investment will increase if the invested capital…

Q: Which of the following is consistent with an increase in a firm's return on investment?   a. an…

A: Return on Investment is the financial ratio that is used to evaluate the profitability or efficiency…

Q: Assume BGL Enterprises increases its operating efficiency by lowering its costs while holding its…

A: Return on equity is the rate of return earned by the company on its equity capital. The return on…

Q: The suitable model to value a firm that has consistent earnings growth, but varies how it pays out…

A: Total Payout model If you want to value a firm that has consistent earnings grow, but varies how it…

Q: Which of the following does NOT always increase a company’s MVA? Group of answer choices: Increasing…

A: Market Value Added (MVA) refers to the amount of wealth which the company is able to create for its…

Q: Can you identify a possible explanation for the company’s declining profits? If so, what is it?

A: Company's declining profits can be possible due to overhead expenses.  Overhead costs are the…

Q: A downward adjustment in a firm's payout ratio means that the firm is reinvesting a : proportion of…

A: Retention ratio refers to those portions of net income of the company which is not paid by the…

Q: How would an increase in each of the following factors affect the AFN?1. Payout ratio2. Capital…

A: Additional funds needed (AFN): Further funds necessary to sustain an increased revenue level (AFN)…

Q: Consider the following information regarding a new investment that a company intends to undertake:.…

A: Calculation of correlation between the two returns: Excel workings:

Q: This refers to the point in the breakeven chart that indicates the sales volume at which the…

A: Break-even point (B.E.P.) is defined as the level of the production, where the production cost of…

Q: Explain the concept of terminal growth rate and discuss why it is impossible for firms with good…

A: The terminal growth rate is the constant rate of growth at which a company’s expected free cash…

Q: In estimating continuing value, how does assuming that RONIC is equal to WACC affect the importance…

A: .Continuing value is the present value of the cash flow when we assume that the growth rate will be…

Q: It has been suggested that when applied to the percentage growth rate in a business, the law of…

A: A business, during its initial stages and phases, sees more growth. With passage of time as the size…

Q: Which of the following is true. The firm's ultimate financial goal is to maximize its net income…

A: A firm's ultimate financial goal is following

Q: Which one of the following is true? O The change in cash position is a linear relationship to…

A: There is no direct relation with growth sales and inventory level if production rates are compared…

Q: Considering each action independently and holding other things constant, which of the following…

A: Based on the above questions we need to answer the correct answer

Q: A firm with a below industry net profit margin can improve its return on total assets by:  a.…

A: Net profit margin:  Net profit margin evaluates how much net profit a firm makes per dollar of…

Q: You're an industry analyst for the telecomm sector, and have been analyzing financial reports from…

A: Given Details Corporate tax rate is 35% To Calculate:- 1.) NOPAT 2.) Free Cash flow 3.) ROIC

Q: Define the term capital intensity. Explain how a decline in capital intensity would affect the AFN,…

A: Introduction: Usually, capital intensity is nothing but the amount of capital that, in comparison to…

Q: For each of the companies described here, would you expect it to have a low, medium, or high…

A: As you have asked a question with multiple parts, we will solve the first 3 parts as per the policy…

Q: The firm's self-supporting growth rate is influenced by the firm's capital intensity ratio. The more…

A: The self supporting growth rate is also known as sustainable growth rate and it is the growth rate…

Q: Questions: Does a low return on sales indicate a weak company? (Y/N). Explain your answer. Do…

A: Multi Step statement of comprehensive income shows all incomes and all expenses of the business at…

Q: m wants to increase its working capital efficiency, it should:      Increase its da

A: Introduction: Working Capital is day to day expense requirement of the organization. It is the…

Q: Is the debt level that maximizes a firm's expected EPS the same as the one that maximizes its stock…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: An increase in a firm's inclination to pay dividends may be because of a decline in profitable…

A: Dividends are paid by the company to their shareholders as a share of the profits.