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Sustainable Growth rate - Universal Theme Parks (UTP)

UNiversal Theme Parks (UTP) reported the following data in its most recent annual report:

Sales $42.5 million
Net income $3.8 million
Dividends $1.1 million
Assets $50.0 million

UTP is financed 100% with equity. What is the company's sustainable growth rate? Suppose that UTPissued bonds to the public andused the proceeds to repurchase half of its outstandingshares. This new capital structure would create additional interest expenses of $2 million. Assuming that the company faces a 35% tax rate, what impact would this restructuring have on its sustainable growth rate?

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See the attached file. Thanks

Universal Theme Parks (UTP) reported the following data in its most recent annual report: 
Sales $42.50 million
Net Income $3.80 million
Dividends $1.10 million
Assets $50.00 million
Debt 0.00%
UTP is financed 100% with equity. What is the company's sustainable growth rate? Suppose that UTP issued bonds to the public and used the proceeds to repurchase half of its outstanding shares. ...

Solution Summary

This post how how to calculate the sustainable growth rate with 100% equity finance and with restructured capital structure.

$2.19