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EC2021 - Corporate Finance | Study

   

Added on  2020-03-04

7 Pages1065 Words45 Views
Running head: CORPORATE FINANCE Corporate FinanceName of the Student:Name of the University: Author’s Note:

1CORPORATE FINANCE Table of ContentsAnswer to Question A.....................................................................................................................1Answer to Question B......................................................................................................................2Reference List and Bibliography.....................................................................................................5

2CORPORATE FINANCE Answer to Question ACalculation of Sustainable Growth RateFormula: Sustainable Growth Rate= Profit margin* Asset turnover * financial leverage * retention ratioProfit margin= Net Income/RevenuesProfit margin= 7957/94595Profit margin= 0.0841Asset turnover= Revenue/Asset Asset turnover= 94595/42966Asset turnover= 2.2016Financial leverage= Asset/Equity Financial leverage= 42966/4333Financial leverage= 9.9159 Retention ratio= Net Income- Dividends/ Net Income Retention ratio= 7957-3404/7957Retention ratio= 0.5722According to the given data of Home Depot, the sustainable growth rate is computed as: Sustainable Growth Rate= 0.0841* 2.2016 * 9.9159 *0.5722 Sustainable Growth Rate= 1.0505

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