Dividend payout ratio and a constant debt–equity ratio

Assignment Help Financial Management
Reference no: EM131025515

The most recent financial statements for Mc Govney Co. are shown here: Income Statement Balance Sheet Sales $ 38,200 Current assets $ 21,800 Long-term debt $ 51,500 Costs 29,100 Fixed assets 76,000 Equity 46,300 Taxable income $ 9,100 Total $ 97,800 Total $ 97,800 Taxes (34%) 3,094 Net income $ 6,006 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?

Reference no: EM131025515

Questions Cloud

Pricing stock issues-what is a fair price per share : Benjamin Garcia's start-up business is succeeding, but he needs $206,000 in additional funding to fund continued growth. Benjamin and an angel investor agree the business is worth $824,000 and the angel has agreed to invest the $206,000 that is neede..
Abandon change the firms decision to accept the project : Hit or Miss Sports is introducing a new product this year. If its see-at-night soccer balls are a hit, the firm expects to be able to sell 60,000 units a year at a price of $50 each. The firm will make the decision to continue or abandon after the fi..
Credit risk-market risk and liquidity risk : The different risks that have to be considered when conducting an analysis are: credit risk (or defaulting on a debt,) liquidity risk (or not being able to move the asset fast enough when needed,) market risk (or lower demand leading to loss of produ..
An exclusive golf club was denied for the second time : You are having a lunch meeting with a loyal and very good customer. Over lunch you happen to mention that your application to an exclusive golf club was denied for the second time. Your customer responds, "Hey, why didn’t you tell me? My family has b..
Dividend payout ratio and a constant debt–equity ratio : The most recent financial statements for Mc Govney Co. are shown here: Income Statement Balance Sheet Sales $ 38,200 Current assets $ 21,800 Long-term debt $ 51,500 Costs 29,100 Fixed assets 76,000 Equity 46,300 Taxable income $ 9,100 Total $ 97,800 ..
Sales and the dividend payout ratio is constant : Consider the following income statement for the Heir Jordan Corporation: HEIR JORDAN CORPORATION Income Statement Sales $ 46,800 Costs 36,200 Taxable income $ 10,600 Taxes (35%) 3,710 Net income $ 6,890 Dividends $ 3,400 Addition to retained earnings..
Current yield better approximation to the yield to maturity : Bond investment problem. Suppose an investor, desiring to earn a higher interest than the average paid by bank on savings, purchases two bonds, say bond A and bond B, and intends to sell them immediately after getting the third coupon payment. For wh..
What is the new price of the bond using duration : You find a bond with 15 years until maturity that has a coupon rate of 8.0 percent and a yield to maturity of 7.1 percent. Suppose the yield to maturity on the bond increases by .25 percent. What is the new price of the bond using duration? What is t..
Determine the expected profit or loss : Kurnick Co. expects that the pound will depreciate from $1.70 to $1.68 in one year. It has no money to invest, but it could borrow money to invest. It has been approved by a bank to borrow either 1 million dollars or 1 million pounds for one year. De..

Reviews

Write a Review

Financial Management Questions & Answers

  Explain what a leveraged buyout

Explain what a leveraged buyout (LBO) is. Define the term divestiture and briefly discuss the major types of divestitures. Provide reasons a company might consider a divestiture.

  Using net present value when evaluating projects

Green Landscaping, Inc. is using net present value (NPV) when evaluating projects. Green Landscaping’s cost of capital is 8.45 percent. What is the NPV of a project if the initial costs are $1,742,890 and the project life is estimated as 12 years? Th..

  Most observers of the financial markets consider

Most observers of the financial markets consider it very likely that overall interest rates will rise in the near future due to actions by the Federal Reserve. Assuming that rates do go up, what will happen to the price of existing bonds of all types..

  Using the free cash flow valuation model

Which of the following is the appropriate way to calculate the price of a share of a given company using the free cash flow valuation model?

  What should be its price in the bond market

If a corporate bond with a face value of $1,000 has 24 years to go until it matures, has a coupon interest rate of 5.7%, paid semiannually, and has a yield to maturity (YTM) of 4.2%, what should be its price in the bond market (ie, PV)?

  What would be its weight on common equity

Raymond co. has 2.3 million of debt, 1 million of preferred stock, and 2.2 million of common equity. what would be its weight on common equity?

  What are the risks involved

Think of a company, e.g., your own company or another company such as Apple or American Airlines, and give a specific example of a real option that the company adopted in the past or might use in the future. If in the past, was it successful? If in t..

  Straight-line depreciation-what is average accounting return

A project has an initial cost of $54,000 and a four-year life. The company uses straight-line depreciation to a book value of zero over the life of the project. The projected net income from the project is $2,000, $3,900, $4,500, and $4,500 a year fo..

  Most basic type of capital expense risk

_________ is the most basic type of Capital Expense Risk, not taking into account the effects of the portfolio.  ________ is an integral part of the Free Cash Flow Calculation, and is also known as a non-cash expense.

  What is an s corporation

What is an S corporation? What do you think is the reason for the 70 percent corporate-dividend exclusion? What are the differences between the operating income, capital gains income, and dividend income of a corporation?

  Underwrite an equity issue with a market value equal

Investment Bankers Association (IBA) has an agreement with Northern Airlines to underwrite an equity issue with a market value equal to $11 million. a) If IBA's underwriting fee is 5 percent and its out-of-pocket expenses associated with the issue ar..

  Which product should be manufactured to maximize profits

Total fixed and variable selling and administrative costs for the purchased ski boots would be $10 per pair. Burge uses machine hours to applicate factory overhead. Included in the factory overhead is $30,000 of fixed factory-wide overhead that ha..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd