If the growth rate of a company is 5 percent and the investment rate is 40...

Question

Question

If the growth rate of a company is 5 percent and the investment rate is 40 percent, what is the ROIC? a. 800 percent O b. 8 p

Answer 1

Answer #1

Growth rate of Company = 5%

Investment rate = 40%

.

Growth rate = Investment rate * ROIC

5% = 40%*ROIC

0.05 = 0.4*ROIC

ROIC = 0.05/0.4

ROIC = 0.125

ROIC = 12.5%

.

So , out of the given options , Option-d : 12.5 percent is the correct answer.

Answer 2

Similar Homework Help Questions

If the growth (g) of a company is 2% and the ROIC is 10%, what is...

If the growth (g) of a company is 2% and the ROIC is 10%, what is the investment rate (IR)? Enter your answer rounded to the nearest whole number, i.e. fifty percent would be entered as 50, not 0.50. DO NOT include a percentage sign in your answer.
1. A company is a fast growing technology company. The firm projects a rapid growth of...

1. A company is a fast growing technology company. The firm projects a rapid growth of 40 percent for the next two years and then a growth rate of 20 percent for the following two years. After that, the firm expects a constant-growth rate of 12 percent. The firm expects to pay its first dividend of $1.25 a year from now. If your required rate of return on such stocks is 20 percent, what is the current price of the...
When a company has an ROIC greater than its cost of capital, faster growth increases value,...

When a company has an ROIC greater than its cost of capital, faster growth increases value, but when it has an ROIC less than its cost of capital, what is the effect on value? a. Faster growth creates value O b. Faster growth destroys value O c. Growth doesn't affect value creation O d. None of the above are true

5. Suppose in the United States economy, the rate of money growth for the current year is 8 percent, the velocity of mon...

5. Suppose in the United States economy, the rate of money growth for the current year is 8 percent, the velocity of money in circulation is constant, and inflation is expected to be about 2 percent over the current year. What is the short run economic growth rate? A) 16 percent B) 10 percent C) 8 percent D) 6 percent E) 4 percent 8. The fisher effect matters in terms of inflation given that A) borrowers agree to loan terms...
The Wintergrass Company has an ROE of 15.1 percent and a payout ratio of 40 percent....

The Wintergrass Company has an ROE of 15.1 percent and a payout ratio of 40 percent. What is the company’s sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Sustainable growth rate %
The Wintergrass Company has an ROE of 15.1 percent and a payout ratio of 40 percent....

The Wintergrass Company has an ROE of 15.1 percent and a payout ratio of 40 percent. What is the company’s sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Sustainable growth rate

In the Solow growth model with population growth of 5 percent and a labor augmenting technological...

In the Solow growth model with population growth of 5 percent and a labor augmenting technological progress of 3 percent, the economy's: A. number of workers grow at 5 percent while the number of effective workers grow at 3%. B. number of workers grow at 3 percent while the number of effective workers grow at 8 percent. C. number of workers grow at 5 percent while the number of effective workers grow at 2 percent. D. number of workers grow...
BACCK Inc. currently has an EPS of $5.23 and an earnings growth rate of 5 percent....

BACCK Inc. currently has an EPS of $5.23 and an earnings growth rate of 5 percent. If the benchmark PE ratio is 14, what is the target price six years from now? A. $77 B. $89 C. $98 D. $81
your investment has a 30% chance of losing 8%, a 40% chance of earning a 12%...

your investment has a 30% chance of losing 8%, a 40% chance of earning a 12% rate of return, and a 30% chance of earning a 15% return. What is your standard deviation of returns? A 12.5% B 10.85% C 7.14% D 9.7%

The Wintergrass Company has an ROE of 15 percent and a payout ratio of 40 percent....

The Wintergrass Company has an ROE of 15 percent and a payout ratio of 40 percent. What is the company’s sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)