Exelon has a 16 percent return on equity and a 43 percent retention ratio. What is...
Exelon has a 16 percent return on equity and a 43 percent retention ratio. What is the sustainable growth rate (under constant debt/equity)?
Hint: Apply the formula g = ROE x b / (1 - ROE x b)
7.39 Percent
6.41 Percent
8.49 Percent
8.49 Percent
9.12 Percent
Homework Answers
Growth Rate = ROE x b / (1 - ROE x b)
= 0.16 * 0.43 / (1- 0.16 * 0.43)
= 0.0688 / 0.9312
= 7.39%
Option A is corect.
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