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Stop and Go has a 4 percent profit margin and a 40 percent dividend payout ratio

1. Stop and Go has a 4 percent profit margin and a 40 percent dividend payout ratio. The total asset turnover is 1.50 and the debt-equity ratio is .55. What is the sustainable rate of growth?

A. 4.94 percent

B. 3.84 percent

C. 5.91 percent

D. 5.29 percent

E. 6.53 percent

2. The Two Sisters has a 10 percent return on assets and a 30 percent retention ratio. What is the internal growth rate?

A. 10.09 percent

B. 6.79 percent

C. 7.00 percent

D. 3.09 percent

E. 2.91 percent

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3. Major Manuscripts, Inc.

2012 Income Statement

Net sales           $             8,300

Cost of goods sold                       7,115

Depreciation    

260

Earnings before interest and taxes           $             925

  Interest paid    

56

Taxable Income              $             869

Taxes  

343

Net income      

$

526

     Dividends        $             197

Major Manuscripts, Inc.

2012 Balance Sheet

               2012                                   2012

Cash    $             2,900                     Accounts payable           $             2,050   

Accounts rec.                 930                         Long-term debt                             350   

Inventory          

3,200   

               Common stock $             3,600   

Total    $             7,030                     Retained earnings         

4,930   

Net fixed assets             

3,900   

                                            

Total assets     

$

10,930   

               Total liabilities & equity

$

10,930   

  

Major Manuscripts, Inc., is currently operating at maximum capacity. All costs, assets, and current liabilities vary directly with sales. The tax rate and the dividend payout ratio will remain constant. How much additional debt is required if no new equity is raised and sales are projected to increase by 10 percent?

A. $176

B. $876

C. $153

D. $362

E. $526

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4. Major Manuscripts, Inc.

2012 Income Statement

Net sales           $             7,700

Cost of goods sold                       6,800

Depreciation    

220

Earnings before interest and taxes           $             680

Interest paid    

60

Taxable Income              $             620

Taxes  

235

Net income      

$

385

     Dividends        $             196

Major Manuscripts, Inc.

2012 Balance Sheet

               2012                                   2012

Cash    $             2,330                     Accounts payable           $             1,780   

Accounts rec.                 870                         Long-term debt                             360   

Inventory          

2,350   

               Common stock $             2,500   

Total    $             5,550                     Retained earnings         

4,120   

Net fixed assets             

3,210   

                                            

Total assets     

$

8,760   

               Total liabilities & equity

$

8,760   

Assume that Major Manuscripts, Inc., is currently operating at 80 percent of capacity and that sales are projected to increase to $10,100. What is the projected addition to fixed assets?

A. $432

B. $475

C. $633

D. $274

E. $158

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5. Hungry Kids

2012 Income Statement

Net sales           $             5,500

Cost of goods sold                       4,100

Depreciation    

725

Earnings before interest and taxes           $             675

Interest paid    

140

Taxable Income              $             535

Taxes  

218

Net income      

$

317

     Dividends        $             82

     Addition to retained earnings $             235

Hungry Kids

2012 Balance Sheet

               2012                                   2012

Cash    $             45                            Accounts payable           $             1,375   

Accounts rec.                 550                         Long-term debt                             1,650   

Inventory          

880   

               Common stock $             2,100   

Total    $             1,475                     Retained earnings         

3,850   

Net fixed assets             

7,500   

                                            

Total assets     

$

8,975   

               Total liabilities & equity

$

8,975   

    

Hungry Kids 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. Sales are projected to increase by 4 percent. What is the external financing need?

A. $44

B. $59

C. $43

D. $42

E. $60

May 24 2018 View more View Less

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