CH03答案
CH03答案
5. The maximum percentage sales increase without issuing new equity is the
sustainable growth rate. To calculate the sustainable growth rate, we first need to
calculate the ROE, which is:
ROE = NI/TE
ROE = $2,325/$10,300
ROE = .2257, or 22.57%
b = 1 – .40
b = .60
Assuming costs and assets increase proportionally, the pro forma financial
statements will look like this:
10. a. The plowback ratio is one minus the dividend payout ratio, so:
b = 1 – .25
b = .75
b. It is possible for the sustainable growth rate and the actual growth rate to
differ. If any of the actual parameters in the sustainable growth rate equation
differ from those used to compute the sustainable growth rate, the actual
growth rate will differ from the sustainable growth rate. Since the sustainable
growth rate includes ROE in the calculation, this also implies that changes in
the profit margin, total asset turnover, or equity multiplier will affect the
sustainable growth rate.
c. The company can increase its growth rate by doing any of the following:
Firm A Firm B
D/TA = .60 D/TA = .35
(TA – E)/TA = .60 (TA – E)/TA = .35
(TA/TA) – (E/TA) = .60 (TA/TA) – (E/TA) = .35
1 – (E/TA) = .60 1 – (E/TA) = .35
E/TA = .40 E/TA = .65
E = .40(TA) E = .65(TA)
Since ROE = Net income/Equity, we can substitute the above equations into the
ROE formula, which yields:
so:
b. The current assets, fixed assets, and short-term debt will all increase at the
same percentage as sales. The long-term debt and common stock will remain
constant. The accumulated retained earnings will increase by the addition to
retained earnings for the year. We can calculate the addition to retained
earnings for the year as:
The addition to retained earnings for the year will be the net income times
one minus the dividend payout ratio, which is:
d. The company cannot just cut its dividends to achieve the forecast growth rate.
As shown below, even with a zero dividend policy, the EFN will still be
$927,263.
The company does have several alternatives. It can increase its asset
utilization and/or its profit margin. The company could also increase the debt
in its capital structure. This will decrease the equity account, thereby
increasing ROE.
16. This problem requires us to work backward through the income statement. First,
recognize that Net income = (1 – TC)EBT. Plugging in the numbers given and
solving for EBT, we get:
Now, we can plug the numbers into the cash coverage ratio and calculate:
Rearranging, we get:
Rearranging, we get:
Next, we can multiply the preceding three factor DuPont equation by EBT/EBT,
which yields:
(1) This is the company's tax burden. This is the proportion of the company's
profits retained after paying income taxes.
(2) This is the company’s interest burden. It will be 1.00 for a company with no
debt or financial leverage.
(3) This is the company’s operating profit margin. It is the operating profit before
interest and taxes per dollar of sales.
(4) This is the company’s operating efficiency as measured by dollar of sales per
dollar of total assets.
(5) This is the company’s financial leverage as measured by the equity multiplier.
The common-size balance sheet answers are found by dividing each category by
total assets. For example, the cash percentage for 2020 is:
The common-base year answers are found by dividing each category value for
2021 by the same category value for 2021. For example, the cash common-base
year number is found by:
$15,176/$12,032 = 1.2613
This means the cash balance in 2021 is 1.2613 times as large as the cash balance
in 2020.
The increase in assets is the beginning assets times the growth rate, so:
Increase in assets = A × g
The addition to retained earnings next year is the current net income times the
retention ratio, times one plus the growth rate, so:
And rearranging the profit margin to solve for net income, we get:
NI = PM(S)
Substituting the last three equations into the EFN equation we started with and
rearranging, we get: