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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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![Your firm has an ROE of 11.2%, a payout ratio of 24%, $586, 300 of
stockholders' equity, and $356,000 of debt. If you grow at your
sustainable growth rate this year, how much additional debt will you
need to issue?
The sustainable growth rate is %. (Round to three decimal place.)
The ending total assets at the sustainable growth rate will be $
(Round to the nearest dollar.)
Because the firm grew at its sustainable growth rate, its debt/equity
ratio remains constant at 0.607198 and the debt-to-assets ratio will be
0.377799. Thus, the new debt in the capital structure will be 0.377799
times $1,022, 509 = $386, 303. Since the firm started at $356,000, it will
issue about $30,303 in additional debt. Is the above statement true or
false?](https://content.bartleby.com/qna-images/question/25d1634f-c760-48f8-9fff-c2aa0196563a/26f574c2-cc6a-4d3c-b0d6-97bf9d158296/s18n8r_thumbnail.jpeg)
Transcribed Image Text:Your firm has an ROE of 11.2%, a payout ratio of 24%, $586, 300 of
stockholders' equity, and $356,000 of debt. If you grow at your
sustainable growth rate this year, how much additional debt will you
need to issue?
The sustainable growth rate is %. (Round to three decimal place.)
The ending total assets at the sustainable growth rate will be $
(Round to the nearest dollar.)
Because the firm grew at its sustainable growth rate, its debt/equity
ratio remains constant at 0.607198 and the debt-to-assets ratio will be
0.377799. Thus, the new debt in the capital structure will be 0.377799
times $1,022, 509 = $386, 303. Since the firm started at $356,000, it will
issue about $30,303 in additional debt. Is the above statement true or
false?
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