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# Growth rate and price to sales ratio

If Hinder, Inc., has a 15 percent ROA and a 25 percent payout ratio, its internal growth rate is......percent

Storico Cleaning, Inc., had additions to retained earnings for the year just ended of \$510,000. The firm paid out \$130,000 in cash dividends, and it has ending total equity of \$6.8 million. If Storico currently has 650,000 shares of common stock outstanding, the earnings per share are \$ .... ; dividends per share are \$ ... ; and book value per share is \$ ..... . If the stock currently sells for \$36 per share, the market-to-book ratio is .... times, and the price-earnings ratio is ..... times. If total sales were \$23,000,000 million, the price-sales ratio is

If the Crash Davis Driving School has a 16 percent ROE and a 23 percent payout ratio, its sustainable growth rate is ......percent

#### Solution Preview

1. Internal Growth Rate = ROA X Retention Ratio /(1-ROA X Retention ratio)
ROA = 15%, Payout ratio = 25% so retention ratio = 1-payout ratio = 75%
IGR = 15% X 75%/(1-15%X75%) = 12.68%

2. The details given are
Addition to retained earnings = 510,000
Dividends = ...

#### Solution Summary

The solution explains how to calculate the internal growth rate, sustainable growth rate and the price to sales ratio

\$2.19