Reference no: EM13722819
Imagine a corporation with $1,000,000 of assets and a debt ratio of 40%. ROE (return on equity) is expected to be 20% for the foreseeable future. Assume the firm keeps the same amount of debt indefinitely (as opposed to keeping the same debt ratio).
a. What do you expect the firm’s earnings to be for the next 3 years if the firm doesn’t pay out any dividends or re-purchase any shares?
b. If the firm doesn’t pay any dividends or re-purchase any shares, at what rate would the firm grow from year to year?
c. If the firm pays 50% of its earnings as dividends, at what rate would the firm grow from year to year?
d. If the firm uses 80% of its earnings to re-purchase shares from its shareholders, at what rate would the firm grow from year to year?
e. If the firm pays 50% of its earnings as dividends, and uses an additional 20% of its earnings to re-purchase shares from its shareholders, at what rate would the firm grow from year to year?
f. What does the term “Sustainable Growth Rate” mean? Would the amounts you have calculated in parts b. to d. equal the Sustainable Growth Rate for the firm?
|
Material ordering costs-labor costs and credit sales
: Write a memo to your supervisor explaining the cash conversion cycle at your company, a manufacturer of plastic toys. Be sure to address the following: Material ordering costs, Labor costs, Credit sales (accounts receivables), Accounts payable and wa..
|
|
Composition and ratification of the constitution
: Search the Internet for scholarly articles on the debate surrounding the composition and ratification of the Constitution.
|
|
Total material cost and the total manufacturing cost
: You have been asked to estimate the cost of 100 prefabricated structures to be sold to a local school district. Each structure provides 1,000 square feet of flow space, with 8-feet ceilings. In 2003, you produced 70 similar structures consisting of t..
|
|
Interest payment is the result of the real rate of interest
: Imagine you borrow $500 from your roommate, agreeing to pay her back $500 plus 10 percent nominal interest in one year. Assume inflation over the life of the contract is expected to be 3.50 percent. What is the total dollar amount you will have to pa..
|
|
Assume the firm keeps the same amount of debt indefinitely
: Imagine a corporation with $1,000,000 of assets and a debt ratio of 40%. ROE (return on equity) is expected to be 20% for the foreseeable future. Assume the firm keeps the same amount of debt indefinitely (as opposed to keeping the same debt ratio).
|
|
Estimate the probability that the exchange rate
: An exchange rate is currently 0.8000. The volatility of the exchange rate is quoted as 12% and interest rates in the two countries are the same. Using the lognormal assumption, estimate the probability that the exchange rate
|
|
Government bonds-corporate bonds and municipal bonds
: Please sort the level of risk, liquidity and return of that bond on the list: Government Bonds, Corporate Bonds, Municipal Bonds, Foreign Bonds and Financial bonds.
|
|
Application-benefits of strategic planning
: As you have been learning, strategic planning can greatly benefit an organization by helping it to validate its mission, set priorities, focus resources, and measure success more accurately, among other things.
|
|
What is the value of conroys unlevered operations
: Marston Marble Corporation is considering a merger with the Conroy Concrete Company. Conroy is a publicly traded company, and its beta is 1.30. Conroy has been barely profitable, so it has paid an average of only 20% in taxes during the last several ..
|