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minicase01_slides_4up - Sustainable growth rate Minicase 1...

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Sustainable growth rate 2006 Income statement Sales 128,700 COGS (90,700) Other expenses (15,380) Depr (4,200) ======= EBIT 18,420 Interest (2,315) ======== Taxable income 16,105 Taxes (40%) (6,442) ======= NI 9,663 dividend (60%) 5797.8 Add. to RE 3865.2 2 2006 Balance Sheet Current assets 11,270 Fixed assets 72,280 ======== Total assets 83,550 Current liabilities 15,030 LTD 25,950 Equity 42,570 ======= 83,550 ROE = NI/E = 9663/42,570 = .227 b = .40 SGR = (ROE x b) / (1 - ROE x b) = .0999 3 EFN at 20% growth rate Assumptions: Sales increase by 20%. Depreciation and interest are based on beginning of period assets and LTD (for convenience; other assumptions are possible). Other Income statement items increase in proportion to sales. Dividend payout ratio remains at 60% Current assets, Fxed assets, and current liabilities increase in pro- portion to sales. 4
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This note was uploaded on 03/31/2008 for the course FNCE 3010 taught by Professor Donchez,ro during the Fall '07 term at Colorado.

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minicase01_slides_4up - Sustainable growth rate Minicase 1...

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