Sebastian is an employee at Plowell Inc. His duties include preparing reports and analyzing company data. He also appraises fina
1 answer:
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Solution :
Given :
James needs $ 1,000,000 after 15 years.
His IRA deposit is $ 200,000 and is earning at the rate of 8% per annum.
Maturity value of $200,000 after 15 years =
= $ 634,434.
Balance fund needed after 15 years = 1,000,000 - 634,434
= $ 365,566
Therefore, the future value of the annuity is :
Here, FV = future annuity value = 365,566
A = periodical investment
k = interest rate = 8%
n = period = 15 years
∴
A = 13,464
Thus, James needs to save $ 13,464 each year end to reach his target.
Answer:
Maximum Dollar Increase = $10079.76
Explanation:
(See attachment for full question)
INCOME STATEMENT
Sales ---------- $67,000
Costs ---------- $43,800
EBIT ------------ $23,200
Taxes (34%) ----$7,888
Net income ------$15,312
BALANCE SHEET
Current Assets ------$31,000
Fixed Assets --------- $118,000
Total ------------------- $149,000
Long-term Debt -----$68,000
Equity ------------------- $81,000
Total ----------------- $149,000
Dividend Payout Ratio = 30%
Plowback Ratio is calculated by: 1 - Dividend Payout Ratio
Plowback Ratio = 1 - 30%
Plowback Ratio = 1 - 30/100
Plowback Ratio = 1 - 0.3
Plowback Ratio = 0.7
Plowback Ratio = 70/100
Plowback Ratio = 70%
Return on Equity (ROE) is calculated by: Net Income/Total Equity
Net Income = $15,132
Total Equity = $81,000
ROE = $15,132/$81,000
ROE = 0.186815
ROE = 18.68%
Calculating Sustainable Growth Rate (SGR)
SGR = (ROE * Plowback Ratio)/(1 - ROE * Plowback)
SGR = (0.186815 * 0.7)/( 1 - 0.186815 * 0.7)
SGR = (0.1307705)(1-0.1307705)
SGR = 0.1307705/0.8692295
SGR = 0.150444157728194
SGR = 0.1504
Max increase = (Sales * SGR)= ($67,000 * 0.1504)
Max Increase = $10079.75856778905
Max Increase = $10079.76
