Gugu’s flower shop Supplies has sales of R180,000, net profit after tax of R16 400, total assets of R280,000, total equity of R200,000, and paid R6 760 in dividends. The firm maintains a constant dividend payout ratio. The firm is currently operating at full capacity. All costs and assets vary directly with sales. The firm does not want to obtain any additional external equity.

Calculate the following:

1. Sustainable growth rate
2. Dividend payout ratio
3. Retention ratio 
4. Projected total assets
5. Current debt 
6. Projected equity 
7. At the sustainable rate of growth, how much new total debt must the firm acquire?

Answer rating: 100% (QA)

Step 1 Answer a Dividend payout ratio Dividend paid Net profit after tax 100 Dividend payout ratio 6760 16400 100 Dividend payout ratio 4122 Return on ... View the full answer