Scribd
Upload
44 views25 pages

Exercise chapter 4

Uploaded by

aquarius21012003
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
44 views25 pages

Exercise chapter 4

Uploaded by

aquarius21012003
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 25

BÀI TẬP EFN, PLUG VARIABLE, SUSTAINABLE GROWTH RATE,

INTERNAL GROWTHRATE

1. Pro Forma Statements [LO1] Consider the following simplified fi


nancial statements for the Fire Corporation (assuming no income
taxes):

The company has predicted a sales increase of 15 percent. It has predicted


that every item on the balance sheet will increase by 15 percent as well.
Create the pro forma statements and reconcile them. What is the plug
variable here?
2. Pro Forma Statements and EFN [LO1, 2] In the previous question,
assume Fire pays out half of net income in the form of a cash
dividend. Costs and assets vary with sales, but debt and equity do
not. Prepare the pro forma statements and determine the external
financing needed.
3. Calculating EFN [LO2] The most recent financial statements for
Dockett, Inc., are shown here (assuming no income taxes):

Assets and costs are proportional to sales. Debt and equity are not.
No dividends are paid. Next year’s sales are projected to be $8,449.
What is the external financing needed?
4. EFN [LO2] The most recent fi nancial statements for GPS, Inc., are
shown here:

Assets and costs are proportional to sales. Debt and equity are not.
A dividend of $2,300 was paid, and the company wishes to maintain
a constant payout ratio. Next year’s sales are projected to be
$30,360. What is the external financing needed?
5. EFN [LO2] The most recent fi nancial statements for Xporter, Inc.,
are shown here:

Assets, costs, and current liabilities are proportional to sales. Long-


term debt and equity are not. The company maintains a constant 40
percent dividend payout ratio. As with every other fi rm in its
industry, next year’s sales are projected to increase by exactly 15
percent. What is the external financing needed?
6. Calculating Internal Growth [LO3] The most recent financial
statements for Live Co. are shown here:

Assets and costs are proportional to sales. Debt and equity are not.
The company maintains a constant 30 percent dividend payout
ratio. No external equity financing is possible. What is the internal
growth rate?

7. Calculating Sustainable Growth [LO3] For the company in the


previous problem, what is the sustainable growth rate?
8. Sales and Growth [LO2] The most recent fi nancial statements for
McGovney Co. are shown here:

Assets and costs are proportional to sales. The company maintains a


constant 30 percent dividend payout ratio and a constant debt–
equity ratio. What is the maximum increase in sales that can be
sustained assuming no new equity is issued?
9. Calculating Retained Earnings from Pro Forma Income [LO1]
Consider the following income statement for the Heir Jordan
Corporation:
A 20 percent growth rate in sales is projected. Prepare a pro forma
income statement assuming costs vary with sales and the dividend
payout ratio is constant. What is the projected addition to retained
earnings?

10. Applying Percentage of Sales [LO1] The balance sheet for the
Heir Jordan Corporation follows. Based on this information and the
income statement in the previous problem, supply the missing
information using the percentage of sales approach. Assume that
accounts payable vary with sales, whereas notes payable do not.
Put “n/a” where needed.
11. EFN and Sales [LO2] From the previous two questions, prepare a
pro forma balance sheet showing EFN, assuming a 15 percent
increase in sales, no new external debt or equity financing, and a
constant payout ratio.
12. Internal Growth [LO3] If the Boddy Shoppe has a 7 percent ROA
and a 25 percent payout ratio, what is its internal growth rate?
13. Sustainable Growth [LO3] If Rondo Corp. has a 14 percent ROE
and a 30 percent payout ratio, what is its sustainable growth rate?

14. Sustainable Growth [LO3] Based on the following information,


calculate the sustainable growth rate for Kaleb’s Kickboxing:

Profit margin = 7.1%

Capital intensity ratio = 0.75

Debt–equity ratio= 0.60

Net income = $48,000

Dividends = $13,000
15. Sustainable Growth [LO3] Assuming the following ratios are
constant, what is the sustainable growth rate?

Total asset turnover = 2.70

Profit margin = 6.5%

Equity multiplier = 1.2

Payout ratio = 35%

16. Full-Capacity Sales [LO1] Alter Bridge Mfg., Inc., is currently


operating at only 92 percent of fixed asset capacity. Current sales
are $640,000. How fast can sales grow before any new fixed assets
are needed?

17. Fixed Assets and Capacity Usage [LO1] For the company in the
previous problem, suppose fixed assets are $490,000 and sales are
projected to grow to $730,000. How much in new fixed assets are
required to support this growth in sales? Assume the company
maintains its current operating capacity.

18. Growth and Profit Margin [LO3] Abacus Co. wishes to maintain a
growth rate of 13 percent per year, a debt–equity ratio of 1.20, and
a dividend payout ratio of 30 percent. The ratio of total assets to
sales is constant at .95. What profit margin must the firm achieve?

19. Growth and Assets [LO3] A firm wishes to maintain an internal


growth rate of 6.5 percent and a dividend payout ratio of 25
percent. The current profit margin is 6 percent, and the firm uses no
external financing sources. What must total asset turnover be?
20. Sustainable Growth [LO3] Based on the following information,
calculate the sustainable growth rate for Clapton Guitars, Inc.:

Profit margin = 5.3%

Total asset turnover = 1.60

Total debt ratio = .45


Payout ratio = 30%

21. Sustainable Growth and Outside Financing [LO3] You’ve


collected the following information about Odyssey, Inc.:

Sales = $165,000 / Net income = $14,800 / Dividends = $9,300 /


Total debt = $68,000/ Total equity = $51,000
What is the sustainable growth rate for the company? If it does
grow at this rate, how much new borrowing will take place in the
coming year, assuming a constant debt–equity ratio? What growth
rate could be supported with no outside financing at all?

22. Sustainable Growth Rate [LO3] Cambria, Inc., had equity of


$145,000 at the beginning of the year. At the end of the year, the
company had total assets of $275,000. During the year, the
company sold no new equity. Net income for the year was $26,000
and dividends were $5,500. What is the sustainable growth rate for
the company? What is the sustainable growth rate if you use the
formula ROE x b and beginning of period equity? What is the
sustainable growth rate if you use end of period equity in this
formula? Is this number too high or too low? Why?
23. Internal Growth Rates [LO3] Calculate the internal growth rate
for the company in the previous problem. Now calculate the internal
growth rate using ROA x b for both beginning of period and end of
period total assets. What do you observe?
24. Calculating EFN [LO2] The most recent financial statements for
Fleury, Inc., follow. Sales for 2012 are projected to grow by 20
percent. Interest expense will remain constant; the tax rate and the
dividend payout rate will also remain constant. Costs, other
expenses, current assets, fixed assets, and accounts payable
increase spontaneously with sales. If the firm is operating at full
capacity and no new debt or equity is issued, what external
financing is needed to support the 20 percent growth rate in sales?
25. Capacity Usage and Growth [LO2] In the previous problem,
suppose the fi rm was operating at only 80 percent capacity in 2011.
What is EFN now?

26. Calculating EFN [LO2] In Problem 24, suppose the firm wishes to
keep its debt– equity ratio constant. What is EFN now?

You might also like