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shtirl [24]
3 years ago
14

High flyer, inc., wishes to maintain a growth rate of 16 percent per year and a debt-equity ratio of 0.90. the profit margin is

4.8 percent, and total asset turnover is constant at 1.08. what is the dividend payout ratio?
Business
1 answer:
Xelga [282]3 years ago
3 0

Answer: The dividend payout ratio is 46.19%.

We follow these steps in order to arrive at the answer:

We begin with the DuPont identity of RoE.

<u>DuPont Identity:</u>

RoE = Net Profit Margin * Asset Turnover Ratio * Equity Multiplier

Now,  

Equity Multiplier = \frac{1}{Debt Ratio}

And Debt Ratio is also expressed as:

Debt Ratio = \frac{D/E}{1+D/E}

where D/E represents the Debt-Equity Ratio.

Substituting the value of D/E ratio from the question in the debt ratio formula above we get,

Debt Ratio = \frac{0.9}{1+0.9}

Debt Ratio = \frac{0.9}{1.9}----(1)

Substituting (1) in the equity multiplier formula above we get,

Equity Multiplier = \frac{1}{\frac{0.9}{1.9}}

Equity Multiplier = \frac{1.9}{0.9}

Substituting Equity Multiplier from above and the relevant numbers from the question in the DuPont identity we get,

RoE = 0.048 * 1.08 * \frac{1.9}{0.9}

RoE = 0.10944

The relationship between RoE and earnings growth rate g is given by the following formula:

RoE = \frac{g}{(1-p)}, where p is the dividend payout ratio.

Plugging in the values in the formula above we get,

0.10944 = \frac{0.16}{(1-p)}

1-p = \frac{0.16}{0.10944}

1-p = 1.461988304

p = 0.461988304 or 46.19%

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sertanlavr [38]

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tekilochka [14]

$24,800 would be the book value of the asset on January 1, 2019

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Divide the estimated useful life (in years) into 1 to arrive at the straight-line depreciation rate.

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4 0
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Philip is thinking about customizing his motorcycle. A paint job, saddlebags, and a radio would cost $600. His motorcycle is old
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Answer:

C) He will temporarily have less money in his bank account.

Explanation:

Since Philip is going to spend $600 in his motorcycle repairs, he will have less money in his bank account.

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LenaWriter [7]

Answer:

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Giving the following information:

Managers expected to pay $5 per kilogram.

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To calculate the actual price per kilogram, we need to use the direct material spending variance.

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6 0
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