Question: Growth Rates based on the result in Problem 31, show that the internal and sustainable growth rates are as given in the chapter. S =

Growth Rates based on the result in Problem 31, show that the internal and sustainable growth rates are as given in the chapter.

S = Previous year’s sales
A = Total assets
D = Total debt
E = Total equity
g = Projected growth in sales
PM = Profit margin
b = Retention (plowback) ratio

Show that EFN can be written as follows:
EFN = - PM(S)b + (A - PM(S)b) × g

Step by Step Solution

★★★★★

3.42 Rating (171 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

We start with the EFN equation we derived in Problem 32 and set it equal to zero EFN 0 PMS... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

29-B-C-F-F-S (82).docx

120 KBs Word File

Students Have Also Explored These Related Corporate Finance Questions!

Based on the result in Problem 30, show that the internal and sustainable growth rates are as given in the chapter. Hint: For the internal growth rate, set EFN equal to zero and solve for g .

Based on the result of Exercise 8.24, show that if X is a random variable having a chi square distribution with v degrees of freedom and v is large, the distribution of X v / 2v can be approximated...

Based on the result of Problem 13.8, plot the vertical field patterns of monopole antennas of lengths = 3/2, , 5/8. Note that a 5/8 monopole is often used in practice.

27. EFN Define the following: S = Previous years sales A = Total assets E = Total equity g = Projected growth in sales PM = Profit margin b = Retention (plowback) ratio Assuming that all debt is...

2. 31. Growth Rates [LO 4.3] Based on the result in Problem 30, show that the internal and sustainable growth rates are as given in the chapter. Hint: For the internal growth rate, set EFN equal to...

Based on the results in Problem 27, show that the internal and sustainable growth rates can be calculated as shown in Equations 3.25 and 3.26. Problem 27 EFN We define the following variables as:...

check on the file and download the...

INSTRUCTIONS FOR EVALUATION OF GROWTH RATES Based on the firm's financial data from the FINANCIAL DATA worksheet and the firm's 2020 ratios from the RATIOS 2020 worksheet complete the following...

Critically evaluate how the competitive advantage of a resource can be measured by the FOUR(4) Tests of Resource's Competitive Power C-180 PART 2 Cases in Crafting and Executing Strategy them through...

Excel Exercise #1 Generating Pro Forma financial statements using Percentage of Sales Approach Due: Friday, September 17, 10 pm For this assignment you will use the real financial statements of an...

A $20,000 mortgage bond that is due in 1 year pays interest of $500 every 3 months. The bonds coupon rate is: (a) 2.5% per year, payable quarterly (b) 5% per year, payable quarterly (c) 5% per year,...

1. Answer the following: a. What is a quorum of the board of directors for purposes of conducting corporate business? What do most states and the RMBCA say with regard to what constitutes a quorum?...

You have arranged for a loan on the purchase of a new car. The loan is for $ 3 0 , 0 0 0 , and the monthly payments are $ 5 8 5 . If the loan will be paid of over the next 6 0 months, what is the APR...

Assume that interest rate parity holds and that 90-day risk-free securities yield 5% in the United States and 5.3% in Germany. In the spot market, 1 euro equals $0.80 dollar. a. Is the 90-day forward...

On June 1, Bash Salad Dressings creates a petty cash fund with an imprest balance of $450. During June, Al Franklin, the fund custodian, signs the following petty cash tickets: On June 30, prior to...

Each of the following situations has an internal control weakness: a. Soft Wizzard Applications sells accounting software. Recently, development of a new program stopped while the programmers...

On May 1, 2012, Bovar Company began the manufacture of a new paging machine known as Dandy. The company installed a standard costing system to account for manufacturing costs. The standard costs for...

Based on what youve learned in this chapter, would you classify the chemistry of polymers as organic or inorganic?Why?

Define each of the following terms: a. Greenmail. b. White knight. c. Golden parachute. d. Crown jewels. e. Shark repellent. f. Corporate raider. g. Poison pill. h. Tender offer. i. Leveraged buyout...

In 2014, activist investor Nelson Pelz was pressuring PepsiCo to split up the company. Pelz felt that PepsiCo should split up the soft drink division, which includes Pepsi, Mountain Dew, and...

Pearl, Inc., has offered $357 million cash for all of the common stock in Jam Corporation. Based on recent market information, Jam is worth $319 million as an independent operation. If the merger...

0 1. Pine Company expects to sell 900 wreaths in December 2018, but wants to plan for 200 more and 175 less than expected. The wreaths sel for $8.00 each and have variable costs of $500 each. Fixed...

Mariela understands Tax-Free Savings Account (TFSA) but also understands that the available contribution room can be tricky to calculate. See Table C to help with your responses. She knows the...

Go to the website http://www.optionsplaybook.com/rookies-comer/learn-options-trading/and read "GETTING YOUR FEET WET'. What is a common mistake that rookie option investors often make? Answer in one...