EBK INVESTMENTS
EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Chapter 18, Problem 5CP

A

Summary Introduction

To calculate: The sustainable growth rate in 2015 and 2018.

Introduction: The sustainable growth rate is calculated by return on equity and retention ratio. The growth rate is product of the ROE and retention ratio.

B

Summary Introduction

To explain: Affect on growth rate by changing the retention ratio and leverage.

Introduction: The sustainable growth rate of a year is directly proportional to the value of retention ratio. Hence is there is an increment in retention ratio, growth rate will also increased.

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