A Firm Has Decided That Its Optimal Capital Structure Is

question 111

Essay

A firm has decided that its optimal capital structure is 100% equity financed.It perceives its optimal dividend policy to be 40% payout ratio.Asset turnover is 0.8.The net profit margin is 10%, and the firm has a target growth rate of 5%.
a.Is the firm's target growth rate consistent with its other goals?
b.By how much does the company need to change its asset turnover to achieve this goal?
c.By how much does the company need to increase the profit margin instead?

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Definitions:

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The act of working together harmoniously for mutual benefit within a group or society.

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