Dividend payout ratio and a constant debt

Dividend payout ratio and a constant debt–equity ratio

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Reference no: EM131025515

The most recent financial statements for Mc Govney Co. are shown here: Income Statement Balance Sheet Sales $ 38,200 Current assets $ 21,800 Long-term debt $ 51,500 Costs 29,100 Fixed assets 76,000 Equity 46,300 Taxable income $ 9,100 Total $ 97,800 Total $ 97,800 Taxes (34%) 3,094 Net income $ 6,006 Assets and costs are proportional to sales. The company maintains a constant 30 percent dividend payout ratio and a constant debt–equity ratio. What is the maximum increase in sales that can be sustained assuming no new equity is issued?

Reference no: EM131025515

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