Is firm target growth rate consistent with its other goals

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Reference no: EM131535691

A firm has decided that its optimal capital structure is 100% equity financed. It perceives its optimal dividend policy to be a 55% payout ratio. Asset turnover is sales/assets = .4, the profit margin is 10%, and the firm has a target growth rate of 2%.

a-1. Calculate the sustainable growth rate. (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

Sustainable growth rate %

a-2. Is the firm’s target growth rate consistent with its other goals?

Yes

b. If not, what should the asset turnover be to achieve its goals? (Do not round intermediate calculations. Round your answer to 3 decimal places.)

Asset turnover

c. Instead, what would the profit margin need to be to achieve its goals? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

Profit margin %

Reference no: EM131535691

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