Given that a firm's return on equity is 18% and management plans to retasin 40% fo earnings for investment purposes, what will be the firm's growth rate? a. 18% b. 7.2% c. 3.2% d. 40%
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Given that a firm's return on equity is 18% and management plans to retasin 40% fo earnings for investment purposes, what will be the firm's growth rate?
a. 18%
b. 7.2%
c. 3.2%
d. 40%
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- If A7X Company has an ROA of 14 percent and a payout ratio of 16 percent, what is its internal growth rate?Determining PB Ratio for Companies with Different Returns and Growth Assume that the present value of expected ROPI follows a perpetuity with growth g (Value = Amount/ [r - g]). Determine the theoretically correct PB ratio for each of the following companies A and B. Note: NOPAT = NOA » RNOA. Company Net Operating Assets Equity RNOA ROE Weighted Avg. Cost of Capital Growth Rate in ROPI $100 $100 19% 19% 10% 2% $100 $100 12% 12% 10% 4% A B Round answers to two decimal places. PB Ratio Company A Company BM12-15. Estimating Cost of Equity Capital Assume that a company’s market beta equals 0.6, the risk-free rate is 5%, and the market return equals 13%. Compute the company’s cost of equity capital. Round answer to one decimal place (ex: 0.0245 = 2.5%) Answer%
- An investor gathers the following data about the LOR,Inc: ROE 15% Retention Ratio 70% Required Return on Shares 12% Next Year's EPS $5 Answer the questions and provide calculations: A. What is the sustainable growth rate of the company? B. justified trailing P/E is closest to: C. justified forward P/E is closest to: D. If the industry justified leading P/E ratio is 18 is the stock of the company fairly valued, under/overvalued? E. What is the companies PEG ratio based on justified forward P/E?Given that a firm's return on equity is 17 percent and management plans to retain 41 percent of earnings for investment purposes, what will be the firm's growth rate? If the firm decides to increase its retention rate, what will happen to the value of its common stock?Gordon Growth Company is expected to pay a dividend of $4 next period and dividends are expected to grow at 6% per year. The required return is 16%. What is the price expected to be in year 4? a. $40 b. $10 c. $41.6 d. $50.50
- Assume that the following ratios are constant. Total asset turnover 1.37, profit margin 6.9%, equity multiplier 1.7, payout ratio 57%. What is the sustainable growth rate?A company has current, trailing earnings of 3.2 per share. The company plans to plowback 0.41, a share of the earnings, at an ROE of 0.084. If the required rate of return is 0.095, what is the present value of the firm's growth opportunities? O -2.47 -2.60 -2.74 -2.37 -2.85Enrich, Inc., has expected earnings of $4 per share for next year. The firm's ROE is 16%, and its earnings retention ratio is 60%. If the firm's market capitalization rate is 12%, what is the present value of its growth opportunities (PVGO)? $28.88 $38.25 O $33.34 $66.67
- Given the following information: Interest rate 9% Tax rate 30% Dividend $2.50 Common stock on the market $50 Growth rate 8% Debt ratio 40% a. Determine the firm's weighted average cost of capital.b. If the debt ratio rises to 50 percent and the cost of funds remains the same, what is the new weighted average cost of capital?c. If the debt ratio rises to 60 percent, the interest rate rises to 11 percent, the price of the stock falls to $35 and the company had to issue additional securities with flotation costs of 5%, what is the cost of capital? Why is this cost different?What is the sustainable growth rate if the ROE is 17% and the payout ratio is 25%. a. 12.79% b. 8.00% c. 14.61% d. 8.62%A firm wants a sustainable growth rate of 2.73 percent while maintaining a dividend payout ratio of 39 percent and a profit margin of 6 percent. The firm has a capital intensity ratio of 2. What is the debt-equity ratio that is required to achieve the firm's desired rate of growth?