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72) BK Metals is currently operating at full capacity. The profit margin and the dividend payout
ratio are held constant. Net working capital and fixed assets vary directly with sales. The
company currently has current liabilities of $3,950, long-term debt of $14,700, net working
capital of $7,850, net fixed assets of $27,600, owners' equity of $20,750, net income of $2,900,
and dividends paid of $870. What is the external financing need if sales increase by 11 percent?
A) $896
B) $1,646
C) $972
D) −$145
E) −$768
73) Bill's has a profit margin of 5 percent and a dividend payout ratio of 20 percent. The total
asset turnover is 1.6 and the debt-equity ratio is .4. What is the sustainable rate of growth?
A) 11.20 percent
B) 9.60 percent
C) 10.89 percent
D) 9.26 percent
E) 9.84 percent
74) Robotics desires a sustainable growth rate of 12.7 percent while maintaining a constant
dividend payout ratio of 25 percent and a profit margin of 12 percent. The company has a capital
intensity ratio of .95. What equity multiplier is required to achieve the company's desired rate of
growth?
A) .84
B) .98
C) 1.02
D) 1.19
E) 1.11
75) A firm has a retention ratio of 45 percent and a sustainable growth rate of 6.2 percent. The
capital intensity ratio is 1.2 and the debt-equity ratio is .64. What is the profit margin?
A) 6.28 percent
B) 7.67 percent
C) 9.49 percent
D) 12.38 percent
E) 14.63 percent
76) Frasier Cabinets wants to maintain a growth rate of 5 percent without incurring any
additional equity financing. The firm maintains a constant debt-equity ratio of .55, a total asset
turnover ratio of 1.30, and a profit margin of 9 percent. What must the dividend payout ratio be?
A) 26.26 percent
B) 38.87 percent
C) 49.29 percent
D) 61.13 percent
E) 73.74 percent
77) Cross Town Express has sales of $137,000, net income of $14,000, total assets of $98,000,
and total equity of $45,000. The firm paid $7,560 in dividends and maintains a constant dividend
payout ratio. Currently, the firm is operating at full capacity. All costs and assets vary directly
with sales. The firm does not want to obtain any additional external equity. At the sustainable
rate of growth, how much new total debt must the firm acquire?
A) $0
B) $6,311
C) $6,989
D) $7,207
E) $8,852
78) The Two Sisters has a return on assets of 9 percent and a dividend payout ratio of 75 percent.
What is the internal growth rate?
A) 3.24 percent
B) 4.05 percent
C) 3.97 percent
D) 2.30 percent
E) 2.25 percent
79) The Dog House has net income of $3,450 and total equity of $8,600. The debt-equity ratio is
.60 and the payout ratio is 30 percent. What is the internal growth rate?
A) 14.47 percent
B) 17.78 percent
C) 21.29 percent
D) 29.40 percent
E) 33.33 percent
80) Nielsen's has annual sales of $352,400 and a profit margin of 5.2 percent. The firm has
beginning owners' equity of $136,400 and ending owners' equity of $139,900. The firm neither
sold nor repurchased shares during the year. What is the firm's retention ratio?
A) 26.87 percent
B) 40.00 percent
C) 36.67 percent
D) 19.10 percent
E) 23.33 percent
81) SLG, Inc., has annual sales of $40,934, depreciation of $3,100, interest paid of $750, cost of
goods sold of $22,400, taxes of $3,084, and dividends paid of $4,060. The firm has total assets of
$55,300 and total debt of $32,600. The firm wants to maintain a constant payout ratio but does
not want to incur any additional external financing. What is the firm's maximum rate of growth?
A) 15.79 percent
B) 16.18 percent
C) 11.49 percent
D) 9.03 percent
E) 13.97 percent
82) Flo's Flowers has annual sales of $61,888, depreciation of $8,100, interest paid of $970, cost
of goods sold of $29,400, taxes of $4,918, and dividends paid of $4,810. The firm has total assets
of $105,300 and total debt of $51,600. The firm does not want any additional external equity
financing and also wants to maintain a constant debt-equity ratio. What rate of growth can this
firm maintain?
A) 27.16 percent
B) 12.27 percent
C) 34.22 percent
D) 13.27 percent
E) 23.82 percent
83) Roy's Welding has annual sales of $96,700, a profit margin of 7.45 percent, and a payout
ratio of 40 percent. The firm has $11,500 of debt and owners' equity of $31,200. What is the
internal growth rate for this firm assuming the payout ratio remains constant?
A) 9.70 percent
B) 13.87 percent
C) 7.31 percent
D) 7.49 percent
E) 11.26 percent
84) Jamestowne Boats has a profit margin of 6.2 percent, a payout ratio of 30 percent, an ROA
of 14.2 percent, and an ROE of 18.6 percent. This firm maintains a constant payout ratio and is
currently operating at full capacity. What is the maximum rate at which the firm can grow
without acquiring any additional external financing?
A) 12.74 percent
B) 11.04 percent
C) 13.02 percent
D) 14.97 percent
E) 9.94 percent
85) Cold Ice has a profit margin of 8.3 percent and a payout ratio of 42 percent. The firm has
annual sales of $386,400, current liabilities of $37,200, long-term debt of $123,800, and net
working capital of $16,700, and net fixed assets of $391,500. No external equity financing is
possible. What is the internal growth rate?
A) 5.91 percent
B) 3.44 percent
C) 4.36 percent
D) 4.02 percent
E) 6.14 percent
86) RPJ Co. has net income of $2,937, a profit margin of 6.3 percent, a retention ratio of 45
percent, total assets of $52,800, and total debt of $24,300. Assets, current liabilities, and costs are
proportional to sales. The company maintains a constant dividend payout ratio and debt-equity
ratio and is operating at full capacity. What is the maximum dollar increase in sales that can be
sustained next year assuming no new equity is issued?
A) $2,151
B) $1,211
C) $2,804
D) $2,267
E) $1,667
87) The Soccer Shoppe has a return on assets of 9 percent, a return on equity of 11.3 percent, and
a payout ratio of 22 percent. What is its internal growth rate?
A) 7.72 percent
B) 5.08 percent
C) 8.49 percent
D) 6.23 percent
E) 7.55 percent
88) Parodies Corp. has a return on assets of 10.9 percent, a return on equity of 16.7 percent, and
a retention ratio of 40 percent. What is its sustainable growth rate?
A) 8.68 percent
B) 9.25 percent
C) 7.49 percent
D) 7.16 percent
E) 8.87 percent
89) Christina's has a profit margin of 7.5 percent, a capital intensity ratio of .8, a debt-equity ratio
of .6, net income of $31,000, and dividends paid of $15,810. What is the sustainable rate of
growth?
A) 4.94 percent
B) 5.29 percent
C) 7.93 percent
D) 6.42 percent
E) 3.58 percent
90) Leon's has a total asset turnover of 1.46 percent, a profit margin of 8 percent, an equity
multiplier of 1.2, and a dividend payout ratio of 32 percent. What is the sustainable growth rate?
A) 10.30 percent
B) 10.53 percent
C) 10.67 percent
D) 10.89 percent
E) 11.01 percent
91) Fix-It Co. wishes to maintain a growth rate of 9.89 percent a year, a constant debt-equity
ratio of .42, and a dividend payout ratio of 40 percent. The ratio of total assets to sales is constant
at 1.3. What profit margin must the firm achieve?
A) 8.13 percent
B) 13.46 percent
C) 13.73 percent
D) 14.33 percent
E) 14.74 percent
92) 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 these ratios constant?
A) .05
B) .40
C) .55
D) .60
E) .95
93) 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 is the total asset turnover (TAT)?
A) 0.87 times
B) 0.90 times
C) 1.01 times
D) 1.15 times
E) 1.86 times
94) Basic Motors has a profit margin of 5.6 percent, a total asset turnover of 1.76, a total debt
ratio of .2, and a dividend payout ratio of .7. What is the sustainable growth rate?
A) 4.68 percent
B) 3.84 percent
C) 2.12 percent
D) 3.49 percent
E) 4.41 percent
95) Country Comfort, Inc. has equity of $168,500, total assets of $195,000, net income of
$63,000, and dividends of $37,800. What is the sustainable growth rate?
A) 14.33 percent
B) 10.78 percent
C) 21.60 percent
D) 12.76 percent
E) 17.59 percent
