1. A firm has wishes to maintain a sustainable growth rate of 13 percent per year, a debt-to-equity ratio of 1.20 and dividend payout ratio of 30%. The total asset turnover ratio is 2.05. What profit margin must the firm achieve? (this is a two-step problem)
2. You would like to purchase a home and are interested to find out how much you can borrow. When your lender calculates your debt to income ratio, he determines that your maximum monthly payment can be no more than $3,200. You would like to have a 30 year fully-amortizing loan and the interest rate offered on such a loan is currently 5%. Given these constraints, what is the largest loan you can obtain?