Following Financial data are available for PQR Ltd. for the financial year ending 2023: (in lakh) 8% Debentures 125 10% Bonds (2022) 50 Equity…
CA Final · Advanced Financial Management · RTP · January 2026
Following Financial data are available for PQR Ltd. for the financial year ending 2023: (in lakh) 8% Debentures 125 10% Bonds (2022) 50 Equity Shares (10 each) 100 Reserves and Surplus 300 Total Assets 600 Assets Turnovers ratio 1.1 Effective interest rate 8% Effective tax rate 40% Operating margin 10% Dividend payout ratio 16.67% Current market Price of Share 14 Required rate of return of investors 15% You are required to: (i) Draw income statement for the year. (ii) Calculate its sustainable growth rate of earnings.
Suggested Answer and Working Notes:
(i) Income statement (₹ Lakhs) Sale 660.00 Operating Exp 594.00 EBIT 66.00 Interest 14.00 EBT 52.00 Tax @ 40% 20.80 EAT 31.20 Dividend @ 16.67% 5.20 Retained Earnings 26.00 (ii) SGR = ROE (1-b) ROE = PAT / NW and NW = 100 lakh + 300 lakh = 400 lakh ROE = (31.2 lakhs /400 lakhs) x 100 = 7.8% SGR = 0.078(1 - 0.1667) = 6.5%
Topics: Financial Policy & Corporate Strategy
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