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Which of the following changes will result in an increase to a company’s sustainable growth rate?
Question options:
|
An increase in dividend payouts |
|
An increase in interest expense |
|
A decrease in tax expense |
Sustainable growth rate is the growth rate a firm can expect without any additional finance growth in respect of sources to be added say debt and equity.
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- Define the term self-supporting growth rate. What is Hatfield’s self-supporting growth rate? Would the self-supporting growth rate be affected by a change in the capital intensity ratio or the other factors mentioned in the previous question? Other things held constant, would the calculated capital intensity ratio change over time if the company were growing and were also subject to economies of scale and/or lumpy assets?Which of the following situation in which the quality of the company’s pay-out to shareholders may decline a. Decrease in cash position b. Increase in positive NPV investment opportunities c. Increase in capital gains tax d. Decrease in marginal tax rate on dividends Which of the following concepts tells us that dividends are to be paid only when the capital budget has been already supplied? a. Gordon Growth model b. Dividend irrelevance theory c. Retain Earnings break-point principle d. Residual Dividend ModelA decrease in which of the following will increase the current value of a share according to the dividend growth model? Required rate of return. Dividend amount. Dividend growth rate. Number of future dividends, provided the number is less than infinite.
- Define the term capital intensity. Explain how a decline in capital intensity would affect the AFN, other things held constant. Would economies of scale combined with rapid growth affect capital intensity, other things held constant? Also, explain how changes in each of the following would affect AFN, holding other things constant: the growth rate, the amount of accounts payable, the profit margin, and the payout ratio.When considering a top-down approach to fundamental analysis, the impact of macroeconomic factors on a stock’s price can have which of the following effects? an increase in real GDP is followed by improvement in current and expected future profits for companies, leading to higher stock price. an increase in real GDP is followed by performance of industries and subsequent improvement in current and expected future profits for companies, leading to higher stock prices. an increase in real GDP, followed by a significant performance of cyclical industries such as automobile and consumer discretionary, will lead to higher stock prices.Find the Fundamental value using dividend growth model with the historical growth rate for (ABC), and Find Fundamental value using the dividend growth model with the sustainable growth rate for(ABC)
- Which of the following will increase the WACC for a tax-paying company? Decrease the proportion of equity financing Decrease the proportion of debt financing Decrease the market value of the equity Increase the market value of the debtHow would rising interest rates, that increase the weighted average cost of capital (WACC) impact business valuations? Would this change if the company being valued was going to receive revenue from the government spending?Which of the following events would cause a company's cost of retained earnings to increase? Group of answer choices the company's stock price falls the company's forecasted growth in profits and dividends is reduced the company diversifies into a safer industry the overall beta for a company falls
- Find the Fundamental value using dividend growth model with the historical growth rate, and Find Fundamental value using the dividend growth model with the sustainable growth rateFor the company in the previous problem, what is the dividend yield? What is the expected capital gains yield?Could a company’s change in NWC be negative in a given year? (Hint: Yes.) Explain how this might come about. What about net capital spending?