Answered

Discover a world of knowledge at Westonci.ca, where experts and enthusiasts come together to answer your questions. Get accurate and detailed answers to your questions from a dedicated community of experts on our Q&A platform. Discover in-depth answers to your questions from a wide network of professionals on our user-friendly Q&A platform.

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?

Sagot :

Tundexi

Answer:

$4,941.96

Explanation:

Note: The complete question is attached as picture below

ROE = NI/TA

ROE = 9,702/81,000

ROE = 0.1198

The plowback ratio b, is (1 - payout ratio)

b =  1 - 30%

b =  1 - 0.30

b =  0.70

Sustainable growth rate = (ROE*b)/ (1 - (ROE*b)

Sustainable growth rate = 0.1198*(0.70) / (1 - 0.1198*(0.70)0

Sustainable growth rate = 0.0915

Sustainable growth rate = 9.15%

Maximum increase in sales = $54,000 * (0.0915)

Maximum increase in sales = $4,941.96

View image Tundexi
We appreciate your time. Please come back anytime for the latest information and answers to your questions. Thanks for using our service. We're always here to provide accurate and up-to-date answers to all your queries. Discover more at Westonci.ca. Return for the latest expert answers and updates on various topics.