What Is The Maximum Increase In Sales That Can Be Sustained Assuming No New Equity Is Issued?

Chapter four Long-Term Financial Planning and Growth

1.	Phil is working on a financial programme for the next three years. This time menstruum is referred to as which ane of the following? E. current financing period

2.	Atlas Industries combines the smaller investment proposals from each operational unit of measurement into a single projection for planning purposes. This process is referred to as which one of the post-obit?

3.

Which one of the following terms is applied to the fiscal planning method which uses the projected sales level every bit the basis for determining changes in balance sheet and income statement business relationship values? A. percentage of sales method B. sales dilution method C. sales reconciliation method

4.	Which 1 of the post-obit terms is divers equally dividends paid expressed as a pct of net income? A. dividend retentivity ratio C. dividend payout ratio

5.

Which one of the post-obit correctly defines the memory ratio? A. ane plus the dividend payout ratio B. addition to retained earnings divided by net income C. add-on to retained earnings divided by dividends paid D. net income minus additions to retained earnings Eastward. net income minus cash dividends

half dozen.

Which i of the following ratios identifies the amount of avails a firm needs in order to generate $1 in sales? D. capital intensity ratio

7.

The internal growth charge per unit of a firm is all-time described as the: A. minimum growth charge per unit doable assuming a 100 percentage retention ratio. B. minimum growth charge per unit achievable if the business firm maintains a constant equity multiplier. C. maximum growth rate achievable excluding external financing of any kind. D. maximum growth rate achievable excluding whatsoever external equity financing while maintaining a abiding debt-equity ratio. Due east. maximum growth rate achievable with unlimited debt financing.

8.

The sustainable growth rate of a firm is best described as the: A. minimum growth rate achievable bold a 100 percent memory ratio. B. minimum growth charge per unit achievable if the house maintains a abiding disinterestedness multiplier. C. maximum growth rate achievable excluding external financing of any kind. D. maximum growth rate achievable excluding any external equity financing while maintaining a constant debt-equity ratio. E. maximum growth rate achievable with unlimited debt financing.

9.

You are developing a financial plan for a corporation. Which of the following questions will be considered every bit you develop this plan? I. How much net working majuscule will be needed? II. Will additional stock-still assets be required? 3. Will dividends exist paid to shareholders? 4. How much new debt must be obtained?

10.

Financial planning: A. focuses solely on the short-term outlook for a house. B. is a process that firms employ merely when major changes to a firm's operations are anticipated. C. is a process that firms undergo once every five years. D. considers multiple options and scenarios for the next two to five years. E. provides minimal benefits for firms that are highly responsive to economical changes.

11.	Fiscal planning accomplishes which of the following for a firm? I. decision of asset requirements II. development of plans to contend with unexpected events Iii. establishment of priorities IV. assay of funding options

12.	Which of the post-obit questions are advisable to accost during the financial planning process? I. Should the house merge with a competitor? II. Should boosted shares of stock exist sold? III. Should a item partitioning be sold? 4. Should a new product be introduced?

13.

Which one of the following statements concerning fiscal planning for a firm is correct? A. Fiscal planning for fixed assets is washed on a segregated footing inside each partition. B. Financial plans often contain alternative options based on economic developments. C. Financial plans frequently contain conflicting goals. D. Financial plans presume that firms obtain no additional external financing. E. The financial planning procedure is based on a single set up of economical assumptions.

14.	You are getting prepare to ready pro forma statements for your business. Which one of the following are y'all near apt to guess start every bit y'all begin this process? E. external financing need

xv.

Which one of the post-obit statements is correct? A. Pro forma statements must assume that no new equity is issued. B. Pro forma statements are projections, not guarantees. C. Pro forma statements are limited to a balance sail and income argument. D. Pro forma fiscal statements must presume that no dividends volition be paid. E. Net working capital needs are excluded from pro forma computations.

16.

When utilizing the percentage of sales approach, managers: I. guess company sales based on a desired level of cyberspace income and the current profit margin. II. consider only those assets that vary directly with sales. Three. consider the current production capacity level. Iv. can project both net income and net cash flows.

17.

Which one of the following is correct in relation to pro forma statements? A. Fixed assets must increment if sales are projected to increment. B. Net working uppercase is affected only when a firm's sales are expected to exceed the house's current product capacity. C. The addition to retained earnings is equal to net income plus dividends paid. D. Long-term debt varies directly with sales when a firm is currently operating at maximum capacity. Eastward. Inventory changes are direct proportional to sales changes.

18.

When constructing a pro forma statement, internet working upper-case letter by and large: B. varies simply if the house is currently producing at full capacity. C. varies only if the firm maintains a fixed debt-disinterestedness ratio. D. varies only if the firm is producing at less than full chapters. E. varies proportionally with sales.

xix.

A pro forma argument indicates that both sales and fixed assets are projected to increase by 7 percentage over their current levels. Given this, you tin can safely assume that the firm: A. is projected to grow at the internal rate of growth. B. is projected to grow at the sustainable charge per unit of growth. C. currently has excess capacity. D. is currently operating at full capacity. E. retains all of its net income.

20.

A firm is currently operating at full capacity. Net working uppercase, costs, and all assets vary directly with sales. The firm does not wish to obtain whatsoever additional equity financing. The dividend payout ratio is constant at 40 per centum. If the house has a positive external financing need, that need will be met by:

21.	Which one of the following policies most direct affects the projection of the retained earnings balance to be used on a pro forma statement? A. net working capital policy B. majuscule construction policy D. uppercase budgeting policy East. capacity utilization policy

22.

You are comparison the current income statement of a firm to the pro forma income argument for next twelvemonth. The pro forma is based on a four percent increment in sales. The firm is currently operating at 85 pct of capacity. Net working capital letter and all costs vary straight with sales. The tax rate and the dividend payout ratio are fixed. Given this information, which ane of the following statements must be truthful? A. The projected cyberspace income is equal to the current year's net income. B. The tax rate volition increase at the same charge per unit as sales. C. Retained earnings will increase past four percentage over its current level. D. Full assets will increment by less than four percent. Due east. Total liabilities and owners' disinterestedness will increase by four percent.

23.	A firm is operating at xc pct of chapters. This information is primarily needed to project which one of the following business relationship values when compiling pro forma statements?

24.	Which one of the following uppercase intensity ratios indicates the largest need for fixed avails per dollar of sales?

25.	Which of the post-obit are needed to decide the amount of stock-still assets required to support each dollar of sales? I. current amount of fixed avails 2. electric current sales Three. current level of operating capacity Iv. projected growth rate of sales

26.

The plowback ratio is: A. equal to net income divided by the change in total disinterestedness. B. the percentage of internet income bachelor to the house to fund hereafter growth. C. equal to one minus the retention ratio. D. the alter in retained earnings divided by the dividends paid. E. the dollar increase in net income divided by the dollar increase in sales.

27.

A firm's net working capital and all of its expenses vary straight with sales. The house is operating currently at 96 percent of capacity. The business firm wants no additional external financing of whatever kind. Which 1 of the following statements related to the firm's pro forma statements for next twelvemonth must be right? A. Full liabilities will remain constant at this year's value. B. The maximum rate of sales increase is four percent. C. The firm cannot exceed its internal rate of growth. D. The projected owners' equity will equal this yr's ending disinterestedness balance. E. Fixed assets must remain constant at the current level.

28.

Which 1 of the following will increment the maximum rate of growth a corporation tin can achieve? A. avoidance of external equity financing B. increase in corporate taxation rates C. reduction in the retention ratio D. subtract in the dividend payout ratio E. subtract in sales given a positive profit margin

29.

Martin Aerospace is currently operating at total capacity based on its current level of assets. Sales are expected to increase past 4.v percent side by side twelvemonth, which is the business firm's internal rate of growth. Net working capital and operating costs are expected to increase directly with sales. The interest expense will remain constant at its current level. The revenue enhancement rate and the dividend payout ratio will be held constant. Current and projected net income is positive. Which ane of the post-obit statements is right regarding the pro forma argument for next year? A. The pro forma profit margin is equal to the current profit margin. B. Retained earnings volition increment at the same charge per unit as sales. C. Total avails volition increment at the same rate as sales. D. Long-term debt will increase in straight relation to sales. Eastward. Owners' equity will remain constant.

30.	A firm'southward external financing need is financed by which of the following? B. net working capital and retained earnings C. net income and retained earnings E. owners' equity, including retained earnings

31.	Sales can oftentimes increase without increasing which 1 of the post-obit?

32.	Blasco Industries is currently at total-capacity sales. Which i of the post-obit is limiting sales to this level?

33.	All else constant, which one of the following will increase the internal charge per unit of growth? A. decrease in the retention ratio B. subtract in cyberspace income C. increase in the dividend payout ratio D. decrease in total assets E. increase in costs of goods sold

34.	The external financing need: A. volition limit growth if unfunded. B. is unaffected by the dividend payout ratio. C. must be funded by long-term debt. D. ignores whatsoever changes in retained earnings. Eastward. considers only the required increment in fixed avails.

35.	Which one of the following volition cause the sustainable growth rate to equal to internal growth rate? A. dividend payout ratio greater than 1.0 B. debt-disinterestedness ratio of 1.0 C. retention ratio between 0.0 and one.0 D. equity multiplier of 1.0 E. cypher dividend payments

36.	The sustainable growth charge per unit: A. assumes there is no external financing of any kind. B. assumes no additional long-term debt is available. C. assumes the debt-equity ratio is constant. D. assumes the debt-equity ratio is 1.0. Eastward. assumes all income is retained by the firm.

37.

If a firm equates its pro forma sales growth to the rate of sustainable growth, and has positive net income and excess chapters, then the: A. maximum capacity level volition have to increase at the same rate as sales growth. B. total avails volition have to increment at the aforementioned rate as sales growth. C. debt-equity ratio will increase. D. retained earnings will increase. East. number of mutual shares outstanding will increment.

38.

Sal's Pizza has a dividend payout ratio of x pct. The firm does non desire to issue boosted equity shares only does desire to maintain its current debt-equity ratio and its electric current dividend policy. The business firm is profitable. Which one of the following defines the maximum charge per unit at which this firm can grow? A. internal growth rate × (1 - 0.ten) B. sustainable growth rate × (1 - 0.10) D. sustainable growth rate

39.	Which of the following can touch on a firm'due south sustainable rate of growth? I. capital intensity ratio Ii. profit margin Iii. dividend policy IV. debt-equity ratio

40.	Financial plans generally tend to ignore which one of the post-obit? B. director'southward goals and objectives C. risks associated with cash flows D. operating chapters levels Eastward. majuscule structure policy

41.	The financial planning procedure tends to place the least accent on which one of the following? C. market value of a house D. capital construction of a firm

42.	The financial planning procedure: I. involves internal negotiations among divisions. II. quantifies senior manager's goals. III. considers only internal factors. 4. reconciles company activities beyond divisions.

43.	A Procrustes approach to financial planning is based on: A. a policy of producing a financial plan once every five years. B. developing a program around the goals of senior managers. C. a proactive approach to the economic outlook. D. a flexible uppercase upkeep. E. a flexible uppercase structure.

44.

Fresno Salads has current sales of $6,000 and a profit margin of 6.v percent. The firm estimates that sales will increase by 4 percent next year and that all costs will vary in directly human relationship to sales. What is the pro forma cyberspace income? Net income = $six,000 × .065 × (1 + .04) = $405.lx

45.

Wagner Industrial Motors, which is currently operating at full capacity, has sales of $29,000, current assets of $1,600, current liabilities of $1,200, net fixed assets of $27,500, and a 5 percent profit margin. The firm has no long-term debt and does non program on acquiring whatsoever. The firm does not pay any dividends. Sales are expected to increase by four.5 percent next year. If all assets, short-term liabilities, and costs vary directly with sales, how much additional equity financing is required for side by side year? Projected assets = ($1,600 + $27,500) × 1.045 = $30,409.fifty Projected liabilities = $i,200 × 1.045 = $one,254 Current equity = $1,600 + $27,500 - $1,200 = $27,900 Projected increase in retained earnings = $29,000 × .05 × 1.045 = $i,515.25 Equity funding need = $30,409.l - $ane,254 - $27,900 - $1,515.25 = -$259.75

46.	The Cookie Shoppe expects sales of $437,500 side by side year. The profit margin is 5.3 percent and the firm has a xxx per centum dividend payout ratio. What is the projected increase in retained earnings? Change in retained earnings = $437,500 × .053 × (1 - 0.30) = $xvi,231

47.	Gladsden Refinishers currently has $21,900 in sales and is operating at 45 pct of the business firm'southward capacity. What is the full capacity level of sales? Total-capacity sales = $21,900/0.45 = $48,667

48.	The Corner Store has $219,000 of sales and $193,000 of total avails. The firm is operating at 87 pct of capacity. What is the capital intensity ratio at total capacity? Full-capacity sales = $219,000/0.87 = $251,724.14 Capital intensity ratio = $193,000/$251,724.14 = 0.77

49.

Miller Bros. Hardware is operating at full capacity with a sales level of $689,700 and fixed assets of $468,000. The profit margin is 7 percent. What is the required addition to stock-still assets if sales are to increase by x percent? Required improver to fixed assets = $468,000 × 0.10 = $46,800 Or, Uppercase intensity ratio = $468,000/$689,700 = 0.678556 Required addition to stock-still assets = $689,700 × 0.10 × 0.678556 = $46,800

50.

Designer'southward Outlet has a uppercase intensity ratio of 0.92 at full capacity. Currently, total assets are $48,900 and current sales are $51,200. At what level of capacity is the business firm currently operating? Full capacity sales = $48,900/0.92 = $53,152.17 Electric current capacity utilization = $51,200/$53,152.17 = 96.3 percent

51.

Monika's Dinor is operating at 94 percent of its fixed asset capacity and has current sales of $611,000. How much can the business firm grow before whatever new stock-still assets are needed? Total-chapters sales = $611,000/0.94 = $650,000 Maximum growth without additional avails = ($650,000/$611,000) - 1 = half dozen.38 per centum

52.

Stop and Go has a iv.5 pct turn a profit margin and an 18 percentage dividend payout ratio. The total asset turnover is 1.6 and the debt-equity ratio is 0.45. What is the sustainable rate of growth? Return on equity = 0.045 × 1.60 × (1 + 0.45) = 0.1044 Sustainable growth = [0.1044 × (one - 0.eighteen)]/{ane - [.1044 × (i - 0.xviii)]} = ix.36 percent

53.

R. N. C., Inc. desires a sustainable growth rate of 4.5 percent while maintaining a 40 pct dividend payout ratio and a 6 percent profit margin. The visitor has a capital letter intensity ratio of 1.23. What equity multiplier is required to achieve the company's desired rate of growth? 0.045 = [ROE × (i - 0.40)]/{i - [ROE × (i - 0.forty)]}; ROE = .07177 0.07177 = 0.06 × (i/1.23) × EM; EM = 1.47

54.

A firm has a memory ratio of 45 percentage and a sustainable growth rate of half-dozen.2 percentage. The upper-case letter intensity ratio is 1.2 and the debt-disinterestedness ratio is 0.64. What is the turn a profit margin? 0.062 = [ROE × 0.45]/[1 - (ROE × 0.45)]; ROE = .129734 0.129734 = PM × (1/1.2) × (1 + .64); PM = nine.49 percent

55.

Frasier Cabinets wants to maintain a growth rate of v pct without incurring any additional equity financing. The business firm maintains a abiding debt-equity ratio of .0.55, a total nugget turnover ratio of one.30, and a profit margin of 9.0 percent. What must the dividend payout ratio be? Render on equity = 0.09 × 1.30 × (1 + 0.55) = 0.18135 Sustainable growth = [0.18135 × b]/[i - (0.18135 × b)] = .05; b = 0.2626 Payout ratio = 1 - 0.2626 = 73.74 percent

56.

Cross Boondocks Express has sales of $137,000, internet income of $14,000, full assets of $98,000, and full disinterestedness of $45,000. The house paid $7,560 in dividends and maintains a constant dividend payout ratio. Currently, the firm is operating at full capacity. All costs and assets vary directly with sales. The business firm does not want to obtain any additional external equity. At the sustainable rate of growth, how much new total debt must the firm acquire? Dividend payout ratio = $7,560/$14,000 = 0.54 Retention ratio = 1 - 0.54 = 0.46 Sustainable growth = [($fourteen,000/$45,000) × 0.46]/{1 - [($14,000/$45,000) × 0.46]} = 0.167012 Projected total avails = $98,000 × ane.167012 = $114,367.22 Current debt = $98,000 - $45,000 = $53,000 Projected equity = $45,000 + ($14,000 × 1.167012 × 0.46) = $52,515.56 New debt required = $114,367.22 - $53,000 - $52,515.56 = $8,852

57.	The Two Sisters has a ix percent return on assets and a 75 percent retentivity ratio. What is the internal growth rate? Internal growth rate = (0.09 × 0.75)/[ane - (0.09 × 0.75)] = seven.24 percent

58.

The Dog House has net income of $3,450 and full equity of $viii,600. The debt-disinterestedness ratio is 0.sixty and the payout ratio is 30 percent. What is the internal growth rate? Total avails = $8,600 × (1 + 0.60) = $13,760 Return on avails = $3,450/$13,760 = .250727 Internal growth = [.250727 × (1 - 0.xxx]/[i - (.250727 × (1 - 0.thirty)] = 21.29 percent

59.	What is Major Manuscripts, Inc.'southward memory ratio? Memory ratio = ($2,600 - $950)/$two,600 = 63 pct

threescore.

Major Manuscripts, Inc. does not want to incur whatsoever additional external financing. The dividend payout ratio is constant. What is the firm'south maximum rate of growth? Retention ratio = ($2,600 - $950)/$2,600 = 0.63 Internal growth rate = [($2,600/$xx,640) × 0.63]/{one - [($two,600/$20,640) × 0.63]} = viii.69 percent

61.

If Major Manuscripts, Inc. decides to maintain a constant debt-disinterestedness ratio, what charge per unit of growth can information technology maintain assuming that no boosted external equity financing is bachelor. Retention ratio = ($two,600 - $950)/$2,600 = 0.63 Sustainable growth rate = {[$ii,600/($ten,000 + $4,510)] × 0.63}/{1-[ii,600/(ten,000+iv,510) x 0.63]} = 12.83 percent

62.

Major Manuscripts, Inc. is currently operating at maximum capacity. All costs, avails, and current liabilities vary straight with sales. The tax rate and the dividend payout ratio will remain constant. How much additional debt is required if no new equity is raised and sales are projected to increase by 6 percent? Projected full avails = $xx,640 × ane.06 = $21,878 Projected accounts payable = $3,350 × 1.06 = $iii,551 Current long-term debt = $2,780 Current common stock = $10,000 Projected retained earnings = $4,510 + [($2,600 - $950) × ane.06] = $6,259 Boosted debt required = $21,878 - $iii,551 - $two,780 - $10,000 - $6,259 = -$712

63.

Major Manuscripts, Inc. is currently operating at 82 percent of capacity. All costs and net working capital vary directly with sales. The taxation rate, the profit margin, and the dividend payout ratio will remain constant. How much additional debt is required if no new equity is raised and sales are projected to increase by 15 percent? Projected current assets = $9,240 × one.15 = $x,626 Projected chapters level = 0.82 × 1.xv = 0.943 (Will not exceed excess capacity.) Projected stock-still avails = $11,400 Projected accounts payable = $3,350 × 1.15 = $3,852.50 Current long-term debt = $2,780 Current common stock = $ten,000 Projected retained earnings = $4,510 + [($ii,600 - $950) × 1.15] = $six,407.5 Additional debt required = $10,626 + $11,400 - $3,852.5 - $2,780 - $10,000 - $half dozen,407.5 = -$one,014

64.	Assume the profit margin and the payout ratio of Major Manuscripts, Inc. are constant. If sales increase past 9 percent, what is the pro forma retained earnings? Pro forma retained earnings = $iv,510 + [($2,600 - $950) × 1.09)] = $six,308.50

65.

Assume that Major Manuscripts, Inc. is currently operating at 97 percent of capacity and that sales are projected to increase to $xx,000. What is the projected improver to fixed avails? Current maximum capacity = $17,100/.97 = $17,628.87 Required add-on to fixed assets = [($11,400/$17,628.87) × $twenty,000] - $11,400 = $1,533

66.	All of Fake Stone's costs and net working capital vary directly with sales. Sales are projected to increase by 3.5 percent. What is the pro forma accounts receivable residuum for next twelvemonth? Pro forma accounts receivable = $1,720 × (1 + .035) = $1,780.xx

67.

The profit margin, the debt-equity ratio, and the dividend payout ratio for False Stone, Inc. are constant. Sales are expected to increase by $1,062 next twelvemonth. What is the projected addition to retained earnings for next year? Projected change in retained earnings = [($23,600 + $1,062)/$23,600] × ($3,420 - $1,368) = $2,144.34

68.

Assume that Imitation Stone, Inc. is operating at full capacity. As well assume that all costs, internet working capital, and fixed avails vary straight with sales. The debt-disinterestedness ratio and the dividend payout ratio are constant. What is the pro forma net stock-still asset value for next twelvemonth if sales are projected to increment by 7.5 percent? Pro forma net fixed avails = $19,600 × (1 + 0.075) = $21,070

69.

Assume that Fake Stone, Inc. is operating at 88 percent of capacity. All costs and internet working capital vary directly with sales. What is the corporeality of the pro forma internet fixed assets for next year if sales are projected to increase past 13 percent? Pro forma capacity level = 0.88 × (1 + 0.13) = 99.44 percentage. No boosted stock-still avails are required. Thus, fixed assets will remain at $19,600.

lxx.

Assume that Fake Stone, Inc. is operating at full chapters. Besides assume that assets, costs, and electric current liabilities vary directly with sales. The dividend payout ratio is abiding. What is the external financing need if sales increment by 12 percent? External financing needed = (1.12 × $25,460) - (1.12 × $2,470) - $8,800 - $10,000 - $4,190 - [$3,420 - $1,368 × 1.12] = $460.56

71.

False Stone, Inc. is projecting sales to decrease by 4 percent next year while the profit margin remains constant. The firm wants to increase the dividend payout ratio by two percent. What is the projected increase in retained earnings for side by side year? Projected dividend payout ratio = ($ane,368/$iii,420) = 40% + ii% = 42% Retention ratio = 1 - 0.42 = 0.58 Projected increase in retained earnings = $iii,420 × (ane - 0.04) × 0.58 = $1,904.26

72.	What is the internal growth charge per unit of Imitation Rock, Inc. assuming the payout ratio remains constant? Internal growth = [($three,420/$25,460) × 0.half dozen]/{1 - [($1,368/$3,420) × 0.6]} = 8.77 pct

73.	What are the pro forma retained earnings for side by side twelvemonth if Fake Stone, Inc. grows at a rate of 2.5 percent and both the profit margin and the dividend payout ratio remain constant? Pro forma retained earnings = $4,190 + [($3,420 - $1,368) × 1.025)] = $6,293.30

74.

Assume that net working capital letter and all of the costs of Fake Rock, Inc. increase directly with sales. Also assume that the taxation rate and the dividend payout ratio are constant. The firm is currently operating at total chapters. What is the external financing need if sales increment by 4 percent? Projected full assets = $25,460 × 1.04 = $26,478.40 Projected accounts payable = $two,470 × 1.04 = $2,568.80 Projected retained earnings = $4,190 + [($3,420 - $ane,368) × 1.04] = $6,324.08 External financing need = $26,478.xl - $2,568.eighty - $8,800 - $ten,000 - $6,324.08 = -$ane,214.48

75-80

Hungry Howie'south is currently operating at lxxx percent of chapters. What is the full-chapters level of sales? Total-chapters sales = $17,300/0.80 = $21,625.00

76.	Hungry Howie'southward is currently operating at 84 percent of capacity. What is the total asset turnover ratio at full chapters? Full-capacity sales = $17,300/0.84 = $20,595.24 Total asset turnover at full-chapters = $xx,595.24/$14,550 = 1.42

77.

Hungry Howie's is currently operating at 96 percentage of capacity. The turn a profit margin and the dividend payout ratio are projected to remain constant. Sales are projected to increase by five pct next twelvemonth. What is the projected improver to retained earnings for side by side year? Projected improver to retained earnings = $1,670 × (ane + .05) = $1,753.50

78.

Hungry Howie'south is currently operating at full capacity. The profit margin and the dividend payout ratio are held constant. Internet working capital and fixed assets vary direct with sales. Sales are projected to increase by 9 percent. What is the external financing needed? Projected total avails = $14,550 × one.09 = $15,859.5 Projected accounts payable = $1,920 × i.09 = $two,092.eight Projected retained earnings = $one,530 + ($1,670 × 1.09) = $3,350.3 External financing demand = $xv,859.five - $2,092.8 - $3,600 - $7,500 - $3,350.iii = -$683.60

79.

Hungry Howie'southward maintains a constant payout ratio. The house is currently operating at full capacity. What is the maximum rate at which the firm tin can grow without acquiring any boosted external financing? Internal growth = [($2,120/$14,550) × ($1,670/$2,120)]/{1 - [($two,120/$xiv,550) × ($1,670/$2,120)]} = 12.97 pct

80.

Hungry Howie's is currently operating at 96 percentage of capacity. What is the required increase in fixed assets if sales are projected to increase by 14 per centum? Total-capacity sales = $17,300/.96 = $18,020.83 Required increase in fixed assets = ($10,850/$18,020.83) × ($17,300 × ane.14) - $10,850 = $1,024

81.

The most recent financial statements for Watchtower, Inc. are shown hither (assuming no income taxes): Assets and costs are proportional to sales. Debt and disinterestedness are not. No dividends are paid. Next year's sales are projected to be $4,750. What is the amount of the external financing needed?

82.

The most recent fiscal statements for Last in Line, Inc. are shown hither: Assets and costs are proportional to sales. Debt and equity are not. A dividend of $992 was paid, and the visitor wishes to maintain a constant payout ratio. Next yr's sales are projected to be $21,830. What is the amount of the external financing need?

83.

The most recent fiscal statements for 7 Seas, Inc. are shown here: Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are non. The company maintains a constant l percentage dividend payout ratio. Similar every other business firm in its industry, adjacent year's sales are projected to increment by exactly 16 percentage. What is the external financing demand?

84.

The most recent financial statements for Benatar Co. are shown hither: Avails and costs are proportional to sales. Debt and equity are not. The visitor maintains a constant 40 pct dividend payout ratio. No external equity financing is possible. What is the internal growth charge per unit? Internal growth rate = [($2,665.26/$42,883) × (1 - 0.40)]/{1 - [($2,665.26/$42,883) × (1 - 0.twoscore)]} = 3.87 per centum

85.

The most recent financial statements for Heng Co. are shown hither: Assets and costs are proportional to sales. The company maintains a abiding 45 percent dividend payout ratio and a abiding debt-equity ratio. What is the maximum increment in sales that can be sustained adjacent year assuming no new equity is issued? Return on disinterestedness = $xiii,068/$74,250 = 0.176 Retentivity ratio = i - .45 = .55 Sustainable growth charge per unit = (0.176 × .55)/[ane - (0.176 × .55)] = .107174 Maximum increase in sales = $55,000 × .107174 = $5,894.60

86.	Consider the income statement for Heir Hashemite kingdom of jordan Corporation: A 22 percentage growth rate in sales is projected. What is the pro forma addition to retained earnings assuming all costs vary proportionately with sales?

87.	The Soccer Shoppe has a ix percent return on assets and a 25 per centum payout ratio. What is its internal growth rate? Retention ratio = 1 - 0.25 = 0.75 Internal growth rate = (0.09 × 0.75)/[1 - (0.09 × 0.75)] = seven.24 pct

88.	The Parodies Corp. has a 22 percent render on equity and a 23 percentage payout ratio. What is its sustainable growth rate? Retention ratio = 1 - 0.23 = 0.77 Sustainable growth rate = (0.22 × 0.77)/[1 - (0.22 × 0.77)] = twenty.39 percent

89.

Consider the following information for Kaleb's Kickboxing: What is the sustainable charge per unit of growth? Return on disinterestedness = .088 × (1/0.62) × (ane + 0.60) = 0.2270968 Retention ratio = ane - ($15,810/$31,000) = 0.49 Sustainable growth rate = (.2270968 × 0.49)/[1 - (.2270968 × 0.49)] = 12.52 percentage

90.	What is the sustainable growth rate bold the following ratios are abiding? Return on disinterestedness = .08 × 1.46 × i.20 = 0.14016 Retention ratio = 1 - 0.32 = 0.68 Sustainable growth rate = (.14016 × 0.68)/[1 - (0.14016 × 0.68)] = 10.53 pct

91.

Seaweed Mfg., Inc. is currently operating at only 84 percent of fixed asset capacity. Current sales are $550,000. What is the maximum rate at which sales can grow before any new fixed assets are needed? Total capacity sales = $550,000/0.84 = $654,761.90 Maximum sales growth = (654,761.90/$550,000) - 1 = 19.05 percent

92.

Seaweed Mfg., Inc. is currently operating at but 86 percent of fixed nugget capacity. Fixed assets are $387,000. Electric current sales are $510,000 and are projected to grow to $664,000. What corporeality must be spent on new fixed assets to support this growth in sales? Full capacity sales = $510,000/0.86 = $593,023.26 Upper-case letter intensity ratio = $387,000/$593,023.26 = 0.652588231 Fixed asset need = ($664,000 × 0.652588231) - $387,000 = $46,319

93.

Fixed Appliance Co. wishes to maintain a growth charge per unit of 8 percent a twelvemonth, a constant debt-equity ratio of 0.42, and a dividend payout ratio of l per centum. The ratio of total avails to sales is abiding at 1.iii. What profit margin must the business firm attain? Retention ratio = 1 - 0.50 = 0.l Sustainable growth rate = 0.08 = (ROE × 0.50)/[1 - (ROE × 0.l)]; ROE = 0.14815 Render on equity = 0.14815 = PM × (1/1.iii) × (1 + 0.42); Profit margin = thirteen.56 pct

94.

A business firm wishes to maintain a growth rate of 8 pct and a dividend payout ratio of 62 per centum. The ratio of total assets to sales is constant at 1, and the turn a profit margin is 10 percent. What must the debt-equity ratio be if the firm wishes to keep that ratio constant? Memory ratio = 1 - 0.62 = 0.38 Sustainable growth rate = 0.08 = (ROE × 0.38)/[ane - (ROE × 0.38)]; ROE = 0.1949 Return on equity = 0.1949 = 0.x × (1/1) × (1 + D/East); D/E = 0.95

95.

A firm wishes to maintain an internal growth rate of 11 percent and a dividend payout ratio of 24 percent. The current profit margin is 7 percent and the house uses no external financing sources. What must the total nugget turnover charge per unit be? Retentivity ratio = 1 - 0.24 = 0.76 Internal growth rate = 0.11 = (ROA × 0.76)/[1 - (ROA × 0.76)]; ROA = 0.1304 Return on assets = 0.1304 = 0.07 × TAT; Total asset turnover = i.86 times

96.

Based on the following data, what is the sustainable growth charge per unit of Hendrix Guitars, Inc.? Total debt ratio = 0.66 = TD/TA TA/TD = one/0.66 one + TD/TE = ane/0.66 D/E = 1/[(1/0.66) - 1] = one.941176 Return on equity = 0.056 × ane.76 × (1 + i.941176) = 0.289882 Retention ratio = 1 - 0.7 = 0.three Sustainable growth rate = (0.289882 × 0.iii)/[1 - (0.289882 × 0.3)] = 9.52 percent

97.

Country Comfort, Inc. had equity of $150,000 at the beginning of the year. At the cease of the year, the visitor had total avails of $195,000. During the yr, the company sold no new equity. Net income for the year was $63,000 and dividends were $44,640. What is the sustainable growth charge per unit? Ending equity = $150,000 + ($63,000 - $44,640) = $168,360 Return on equity = $63,000/$168,360 = 0.3742 Retention ratio = ($63,000 - $44,640)/$63,000 = 0.2914 Sustainable growth charge per unit = (0.3742 × 0.2914)/[i - (0.3742 × 0.2914)] = 12.24 percentage

98.

The most recent fiscal statements for Moose Tours, Inc. follow. Sales for 2009 are projected to grow past 16 per centum. Involvement expense volition remain constant; the revenue enhancement rate and dividend payout charge per unit will also remain constant. Costs, other expenses, current avails, and accounts payable increase spontaneously volition sales. If the firm is operating at full capacity and no new debt or equity is issued, how much external financing is needed to support the 16 percent growth rate in sales?

What Is The Maximum Increase In Sales That Can Be Sustained Assuming No New Equity Is Issued?,

Source: https://orange520.blogspot.com/2016/11/financial-management-chapter-4-long.html

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