7. High Flyer, Inc., wishes to maintain a growth rate of 14.25 percent per year and a debt-equity ratio of .55. The profit margin is 4.5 percent, and total asset turnover is constant at 1.15. What is the dividend payout ratio? (Do not round intermediate calculations.Negative amount should be indicated by a minus sign. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).) Is this payout ratio possible? High Flyer, Inc., wishes to maintain a growth rate of 14.25 percent per year and a debt-equity ratio of .55. The profit margin is 4.5 percent, and total asset turnover is constant at 1.15. Solution Return on equity = Profit margin *Asset turnover *Debt equity = .045 * 1.15 * .55 = .0285 or 2.85% Growth =Return on equity * Retention ratio .1425 = .0285 *RR RR = .1425 /.0285 = 5 oe (5*100 = 500% ) a)Dividend payout ratio = 1- Retention ratio = 1 - 5 = - 4 or -400% b)No,as dividend [ayout ratio cannot be negative..

1. 7.
High Flyer, Inc., wishes to maintain a growth rate of 14.25 percent per year and a debt-equity
ratio of .55. The profit margin is 4.5 percent, and total asset turnover is constant at 1.15.
What is the dividend payout ratio? (Do not round intermediate calculations.Negative amount
should be indicated by a minus sign. Enter your answer as a percent rounded to 2 decimal places
(e.g., 32.16).)
Is this payout ratio possible?
High Flyer, Inc., wishes to maintain a growth rate of 14.25 percent per year and a debt-equity
ratio of .55. The profit margin is 4.5 percent, and total asset turnover is constant at 1.15.
Solution
Return on equity = Profit margin *Asset turnover *Debt equity
= .045 * 1.15 * .55
= .0285 or 2.85%
Growth =Return on equity * Retention ratio
.1425 = .0285 *RR
RR = .1425 /.0285
= 5 oe (5*100 = 500% )
a)Dividend payout ratio = 1- Retention ratio
= 1 - 5 = - 4 or -400%
b)No,as dividend [ayout ratio cannot be negative.