# FIN 571 Week 3 Connect lab Latest 2016 Version

Jun 19th, 2016
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1. If the Hunter Corp. has an ROE of 11 and a payout ratio of 19 percent, what is its sustainable growth rate 2. The most recent financial statements for Williamson, Inc., are shown here (assuming no income taxes): Income Statement Balance Sheet Sales \$ 8,500 Assets \$ 19,500 Debt \$ 6,200 Costs 6,000 Equity 13,300 Net income \$ 2,500 Total \$ 19,500 Total \$ 19,500 Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year’s sales are projected to be \$10,115. What is the external financing needed? 3. The return on equity can be calculated as: 4. Which account is least apt to vary directly with sales? 5. One of the primary weaknesses of many financial planning models is that they: 6. In the financial planning model, the external financing needed (EFN) as shown on a pro forma balance 7. The maximum rate at which a firm can grow while maintaining a constant debt-equity ratio is best defined by its: 8. Marcie's Mercantile wants t

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1.If the Hunter Corp. has an ROE of 11 and a payout ratio of 19 percent, what is its sustainablegrowth rateb = 1 .19b = .81Now we can use the sustainable growth rate equation to get:Sustainable growth rate = (ROE b) / [1 (ROE b)]Sustainable growth rate = [.11(.81)] / [1 .11(.81)]Sustainable growth rate = .0978, or 9.78%2. The most recent financial statements for Williamson, Inc., are shown here (assuming noincome taxes):Income StatementBalance SheetSales\$ 8,500Assets \$ 19,500Debt \$ 6,200Costs6,000Equity 13,300Net income\$ 2,500Total \$ 19,500Total \$ 19,500Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid.Next years sales are projected to be \$10,115.What is the external financing needed?An increase of sales to \$10,115 is an increase of:Sales increase = (\$10,115 8,500) / \$8,500 = 0.19 or 19%Assum

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