1) A firm desires to sustain the internal growth rate of 7% and dividend payout ratio of 25% the present profit margin is 5% and firm utilizes no external financing source what should total asset turnover be?
2) A company is planning the expansion. Initial investment is $480,000 and anticipates cash inflows as given below. The cost of capital is 12.2%. Determine the profitability index and should the firm go ahead with project?
3) Explain the problems rising when managers and shareholders have dissimilar time horizons in their investment in firm. Provide the formulas for manager’s project valuation, and valuation to shareholders of firm. Explain all terms, and briefly explain the differences between these two estimates of project value.