A company has decided that its optimal capital structure is 100% equity financed. You perceive that your optimal dividend policy is a payout rate of 55%. Asset turnover is sales/assets = 0.4, profit margin is 10%, and the company has a target growth rate of 2%.

a-1.	Calculate the sustainable growth rate. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 1 decimal place.)

Sustainable growth rate

%

a-2.

Is the company's target growth rate consistent with its other goals?

	Yeah
	No

b.	If not, what should the asset turnover be to achieve your goals? (Do not round intermediate calculations. Round your answer to 3 decimal places.)

asset turnover

C.	Instead, what should the profit margin be to achieve your goals? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 1 decimal place.)

Profit margin

%

Answer rating: 100% (QA)

a1 To calculate the sustainable growth rate we can use the formula Sustainable Growth Rate Profit Ma... View the full answer