I can't figure out a couple problems so if someone can explain how to do any of these few I'd appreciate it

8.
You are given the following information on Kaleb's Kickboxing:


Profit margin 5.7 %
Capital intensity ratio 0.66
Debt–equity ratio 0.7
Net income $ 62,000
Dividends $ 14,400

Calculate the sustainable growth rate.


10.
Abacus Co. wishes to maintain a growth rate of 12.6 percent a year, a debt–equity ratio of 1.3, and a dividend payout ratio of 35 percent. The ratio of total assets to sales is constant at 0.93.

What profit margin must the firm achieve?


13.

I think I'm only gonna be able to answer 8.

We need the return on equity to calculate the sustainable growth rate. To calculate return on equity, we need to realize that the total asset turnover is the inverse of the capital intensity ratio and the equity multiplier is one plus the debt-equity ratio. So, the return on equity is:



ROE = (Profit margin)(Total asset turnover)(Equity multiplier)

ROE = (0.057)(1/0.66)(1 + 0.7)

ROE = 0.146818.. or 14.68%



Next we need the plowback ratio. The plowback ratio is one minus the payout ratio. We can calculate the payout ratio as the dividends divided by net income, so the plowback ratio is:



b = 1 – (14 400 / 62 000)

b = 0.7677



Now we can use the sustainable growth rate equation to find:



Sustainable growth rate = [(ROE)(b)] / [1 – (ROE)(b)]

Sustainable growth rate = [0.1468*0.7677] / [1 – 0.1468*0.7677]

Sustainable growth rate = 0.1270 = 12.70 %

This post was edited by Cenderze on Feb 10 2016 12:34pm