Reference no: EM133251823
Question - NiteLate Inc. had revenue of $179,000 last year, costs of $107,400 and depreciation of $26,850. The company paid 5.9% interest on its debt, and its average tax rate is 0.25. NiteLate paid out $17,900 in dividends, and wants to maintain the same dividend payout ratio in the future.
At the beginning of the year, the company had a book value of debt of $37,000 and a book value of equity of $54,000. Over the course of the year, no debt or equity was newly issued or retired.
1. What was net income last year (in $)?
2. What is the sustainable growth rate?
3. How much does the company have to newly borrow to keep a constant debt/equity ratio (in $)?
4. What rate of growth is sustainable without any additional borrowing (internal growth rate)?
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