You have located the following information on Rock Company: debt ratio = 40%, capital intensity ratio = 2.25 times, profit margin = 8%, and dividend payout ratio = 25%. a. What is the return on equity for Rock? b. What is the sustainable growth rate for Rock?

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter11: Determining The Cost Of Capital
Section: Chapter Questions
Problem 5MC
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You have located the following information on
Rock Company: debt ratio
=
40%, capital
intensity ratio = 2.25 times, profit margin = 8%,
and dividend payout ratio = 25%.
a. What is the return on equity for Rock?
b. What is the sustainable growth rate for Rock?
Transcribed Image Text:You have located the following information on Rock Company: debt ratio = 40%, capital intensity ratio = 2.25 times, profit margin = 8%, and dividend payout ratio = 25%. a. What is the return on equity for Rock? b. What is the sustainable growth rate for Rock?
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