Homework Answers
Answer:
Calculate ROE:
ROE=(Profit margin x Total asset turnover x Equity
multiplier)
6.9x 1/0.78 x (1+0.9)
=16.81
Calculate plowback ratio:
b=1-(Dividend/Net income)
=1-(16800/86000)
=1-0.1953
=0.8047
Sustainable growth rate:
Sustainable growth rate = (ROE x b)/(1-(ROE x b))
=(0.1681 x 0.8047)/(1-(0.1681 x 0.8047))
=0.1353/0.8647
=0.1565 or 15.65%
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