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91.
Seaweed Mfg., Inc. is currently operating at only 84 percent of fixed asset
capacity. Current sales are $550,000. What is the maximum rate at which
sales can grow before any new fixed assets are needed?
92.
Seaweed Mfg., Inc. is currently operating at only 86 percent of fixed asset
capacity. Fixed assets are $387,000. Current sales are $510,000 and are
projected to grow to $664,000. What amount must be spent on new fixed
assets to support this growth in sales?
93.
Fixed Appliance Co. wishes to maintain a growth rate of 8 percent a year, a
constant debt-equity ratio of 0.42, and a dividend payout ratio of 50 percent.
The ratio of total assets to sales is constant at 1.3. What profit margin must
the firm achieve?
94.
A firm wishes to maintain a growth rate of 8 percent and a dividend payout
ratio of 62 percent. The ratio of total assets to sales is constant at 1, and
the profit margin is 10 percent. What must the debt-equity ratio be if the
firm wishes to keep that ratio constant?
95.
A firm wishes to maintain an internal growth rate of 11 percent and a
dividend payout ratio of 24 percent. The current profit margin is 7 percent
and the firm uses no external financing sources. What must the total asset
turnover rate be?
96.
Based on the following information, what is the sustainable growth rate of
Hendrix Guitars, Inc.?
97.
Country Comfort, Inc. had equity of $150,000 at the beginning of the year. At
the end of the year, the company had total assets of $195,000. During the
year, the company sold no new equity. Net income for the year was $63,000
and dividends were $44,640. What is the sustainable growth rate?
98.
The most recent financial statements for Moose Tours, Inc. follow. Sales for
2009 are projected to grow by 16 percent. Interest expense will remain
constant; the tax rate and dividend payout rate will also remain constant.
Costs, other expenses, current assets, and accounts payable increase
spontaneously will sales. If the firm is operating at full capacity and no new
debt or equity is issued, how much external financing is needed to support
the 16 percent growth rate in sales?
Essay Questions
99.
Why do financial managers need to understand the implications of both the
internal and the sustainable rates of growth?
100.
Identify the four primary determinants of a firm's growth and explain how
each factor could either add to or limit the growth potential of a firm.
101.
A) What are the assumptions that underlie the internal growth rate and B)
what are the implications of this rate?
102.
Nelson's Landscaping Services just completed a pro forma statement using
the percentage of sales approach. The pro forma has a projected external
financing need of -$5,500. What are the firm's options in this case?
103.
Smith & Daughters is getting ready to compile pro forma statements for the
next few years. How can the managers establish a reasonable range of
growth rates that they should consider during this planning process?
