The answer is not 18.12 Assume the following ratios are constant. Total asset turnover Profit margin...

Question

Question

The answer is not 18.12

Answer 1

Answer #1

ROE = (PM)(TAT)(EM)

ROE = (0.062)(2.34)(1.81)

ROE = 0.2626 or 26.26%

Plowback ratio = 1 - Dividend payout ratio

Plowback ratio = 1 - 0.31

Plowback ratio = 0.69

Sustainable growth rate = (ROE × b) / [1 – (ROE × b)]

Sustainable growth rate = [0.2626(0.69)] / [1 – 0.2626(0.69)]

Sustainable growth rate = 0.2213 or 22.13%

Answer 2

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