Fundamentals of Corporate Finance 3e Test Bank
80.
Mercantile Co. has net income of $3,413,500 on assets of $16,109,445 and retains 55 percent of
its income every year. What is the company’s internal growth rate? (Do not round intermediate
calculations. Round final answer to two decimal places.)
A)
21.21%
B)
8.62%
C)
11.65%
D)
9.43%
Fundamentals of Corporate Finance 3e Test Bank
81.
Mandolin Bottlers Co. has net income of $4,272,335 and retains 65 percent of its income every
year. If the company’s internal growth rate is 8.6 percent, what is the firm’s total assets? (Round
your answer to the nearest dollar.)
A)
$32,290,904
B)
$238,824
C)
$30,388,235
D)
None of these
Fundamentals of Corporate Finance 3e Test Bank
82.
Meredith Inc. has a return on equity of 21.5 percent, an equity ratio of 55 percent, and a
dividend payout ratio of 70 percent. What is the company’s internal growth rate? (Round to two
decimal places)
A)
8.32%
B)
3.55%
C)
6.43%
D)
4.84%
Fundamentals of Corporate Finance 3e Test Bank
83.
Sterling Resorts Co. has total assets worth $13,442,975. It is expecting to grow its revenue at a
rate of 25 percent next year. For next year, it expects a net income of $3,475,321 and will pay
out 45 percent as dividends. What is the external financing needed by the firm to meet its
growth expectations?
A)
$1,796,849.30
B)
$1,449,317.20
C)
No external funding is needed.
D)
None of these
Ans:
B
Fundamentals of Corporate Finance 3e Test Bank
84.
Nederland Finance Company has total assets worth $9,751,223. It is expecting to grow its
revenue at a rate of 20 percent next year and will have a net income of $2,213,564 next year.
The firm pays out 65 percent of its net income as dividends. What is the external financing
needed by this firm to meet its growth expectations?
A)
$1,175,497.20
B)
$511,428.00
C)
No external funding is needed.
D)
None of these
Ans:
A
Fundamentals of Corporate Finance 3e Test Bank
85.
Triumph Company has total assets worth $6,413,228. Next year it expects a net income of
$3,145,778 and will pay out 70 percent as dividends. If the firm wants to limit its external
financing to $1 million, what is the growth rate it can support? (Round your final answer to one
decimal place.)
A)
32.9%
B)
6.4%
C)
30.3%
D)
26.5%
Ans:
C
Fundamentals of Corporate Finance 3e Test Bank
86.
Jockey Company has total assets worth $4,417,665. At year-end, it will have net income of
$2,771,342 and pay out 60 percent as dividends. If the firm wants no external financing, what is
the growth rate it can support? (Round your final answer to one decimal place)
A)
32.9%
B)
25.1%
C)
30.3%
D)
27.3%
Fundamentals of Corporate Finance 3e Test Bank
87.
If Newell Corp. has a ROE of 18.6 percent and a dividend payout ratio of 60 percent, what is its
sustainable growth rate?
A)
7.44%
B)
2.15%
C)
0.47%
D)
8.2%
88.
If Merton Corp. has a ROE of 23.4 percent, what is the plowback ratio needed to achieve a
sustainable growth rate of 7 percent? (Round to nearest whole number.)
A)
34%
B)
30%
C)
24%
D)
28%
Ans:
B
Fundamentals of Corporate Finance 3e Test Bank
89.
Sterling Inc. currently has sales of $4,512,644 and net income of $736,253. It has a debt ratio of
47 percent and a dividend payout ratio of 65 percent. The company has total assets of
$3,812,832. What is the company’s sustainable growth rate? (In your interim computations,
round your ROE percentage to one decimal place.)
A)
12.74%
B)
23.72%
C)
18.96%
D)
20.10%
Ans:
A
Fundamentals of Corporate Finance 3e Test Bank
90.
Courtney Bike, Co. has a net profit margin of 7.8 percent, a debt ratio of 45 percent, total assets
of $2,112,370, and sales of $4,276,990. If the company has a dividend payout ratio of 60
percent, what is the company’s sustainable growth rate? (Do not round intermediate
calculations. Round final answer to one decimal place.)
A)
17.2%
B)
15.6%
C)
11.5%
D)
18.9%
Ans:
C
Fundamentals of Corporate Finance 3e Test Bank
91.
Explain how the strategic plan, investment plan, and financing plan integrate to help
management do financial planning.
AICPA: Industry/Sector Perspective
92.
Discuss the implications of the internal growth rate.
Fundamentals of Corporate Finance 3e Test Bank
93.
Explain the sustainable growth rate and discuss what it means to a firm’s management.