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Abacus Co. wishes to maintain a growth rate of 14 percent a year, a debt–equity ratio...

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Accounting

Abacus Co. wishes to maintain a growth rate of 14 percent ayear, a debt–equity ratio of 1.3, and a dividend payout ratio of 25percent. The ratio of total assets to sales is constant at 0.6.What profit margin must the firm achieve? (in %)

Answer & Explanation Solved by verified expert
4.4 Ratings (911 Votes)
i Retention rate 1 Payout ratio 1 025 075 or 75 ii sustainable growth rate Return on equity x Retention rate 14 Return on equity x 075 Return on equity 1867 iii ratio of total assets to    See Answer
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