Question: Need help on this question, Just part C (PROFIT MARGIN) Problem 18-21 Sustainable Growth (LO3) A firm has decided that its optimal capital structure is

Need help on this question, Just part C (PROFIT MARGIN)

Need help on this question, Just part C (PROFIT MARGIN) Problem 18-21

Problem 18-21 Sustainable Growth (LO3) A firm has decided that its optimal capital structure is 100% equity-financed. It perceives its optimal dividend policy to be a 40% payout ratio. Asset turnover is sales/assets = 0.6, the profit margin is 10%, and the firm has a target growth rate of 4%. a-1. Calculate the sustainable growth rate. (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) a-2. Is the firm's target growth rate consistent with its other goals? b. If the firm's target growth rate is not consistent with its other goals, what would asset turnover need to be to achieve its goals? (Do not round intermediate calculations. Round your answer to 3 decimal places.) .c. If the firm's target growth rate is not consistent with its other goals, how high would the profit margin need to be to achieve its goals? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) 5 a-1. 3.6 % a-2. No Sustainable growth rate Is the firm's target growth rate consistent with its other goals? Asset turnover Profit margin b. 0.666 C. %

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

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

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!