EFN [LO2] Define the following:
Assuming all debt is constant, show that EFN can be written as follows:
Hint: Asset needs will equal A × g. The addition to
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Fundamentals of Corporate Finance
- Assume the following ratios are constant. Total asset turnover = 2.19 Profit margin = 4.7% = 1.66 Equity multiplier Payout ratio = 44% What is the sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Sustainable growth rate %arrow_forwardconsider the following data RF= 4.15% RPM = 5.35% and B= .85 based on the CAPM approach what is the cost of equity from retained earnings?arrow_forwardAssume the following ratios are constant. Total asset turnover = 2.16 Profit margin = 4.4 % Equity multiplier = 1.63 Payout ratio = 41 % What is the sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)arrow_forward
- If a bank has a leverage ratio of 0.5 and a return on assets of 1%, what is its return on equity? Select one: OA 0.2% O B. 2% OC 5% O D. 20%arrow_forwardyou have been provided with the following data D1=$1.27 PO=60 and G=8 constant. What is the cost of equity from retained earnings based on the DCF approach?arrow_forwardWhich of the following are determining EFN when% of sales approach is applied normally based on growth rate? 1. Increase in tot assets 2. New Borrowing 3. Taxes Payable 4. Addition to RE A. 1 only B. 1&2 C. 1,2 & 3 D. 1,2 & 4 E. 1,2,3 & 4arrow_forward
- Which of the following statements is true? O A. Profit margin is calculated by dividing total assets by sales. B. Return on Equity rises if equity increases and net income remain constant. C. A 10% increase in cash will lead to a greater Cash Ratio O D. The current ratio increases if the current liabilities increasearrow_forwardAssume the following ratios are constant. Total asset turnover Profit margin Equity multiplier Payout ratio = Sustainable growth rate |||||||| 2.22 5.0% 1.69 What is the sustainable growth rate? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. 47% %arrow_forwardand the company wishes to maintain a constant payout ratio. Next year's sales are projected to What is the external financing needed? 5. EFN [LO2] The most recent financial statements for Assouad, Inc., are shown here: Income Statement Balance Sheet 5 Q Sales $8,700 5,600 $3,100 Current assets Fixed assets $ 4,200 10,400 Costs Taxable income Current liabilities Long-term debt Equity 3,800 Q Taxes (25%) 775 Total $14,600 8,900 Net income $2,325 Total $14,600 Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 40 percent dividend payout ratio. As with every other firm in next year's sales are projected to increase by exactly 15 percent. What is the external financing needed?arrow_forward
- m.Debt ratio is ____________%. n.Debt to Equity ratio is ___________%. o.Net profit margin is _____%.arrow_forwardCalculate the Weighted Average Cost of Capital (WACC) for McCormick and Company using the formula WACC = (WD x RD x (1-T)) + (WS x Rs) Note that -- Rs = the cost of equity Rd = the cost of debt T = the tax rate WD = Value of debt / (Value of debt plus value of equity) WS = Value of equity / (Value of debt plus value of equity) **Note that the weight of debt plus the weight of equity must total to 100%, as there are only two components in the capital structure.** In order to estimate the weights of debt and equity in the total capital structure, the CFO suggests using the book value of debt and the market value of equity. To determine the book value of debt, use data from the year end November 2019 McCormick 10-K. Look on the Balance sheet and add the following -- Short term borrowings, Current portion of long term debt, and Long term debt. To determine the market value of equity, use the following data: On March 17, 2020 the market value of equity (or "Market Cap")…arrow_forwardThe Wilson Corporation has the following relationships: Sales/Total assets 2.0 Return on assets (ROA) 4.0% Return on equity (ROE) 6.0% What is Wilson's profit margin and debt ratio? (Ctrl) num k 8 # $ 9 7 8 3 4 5 6 5 6 Y E R 2.arrow_forward
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