Reading 46: Discounted Dividend Valuation - LOS a ～ Q6-7

答案和详解如下：

6.Based on the forecast data in Table 3, Flyaweight’s sustainable growth rate (SGR) is closest to which value? If asset turnover were to rise from the forecast level, what would be the impact on SGR?

A)                                        24%     Increase

B)                                        22%     Decline

C)                                        22%     Increase

D)                                        24%     Decline

The correct answer was C)

Note that total assets for the firm must equal total liabilities plus owners’ equity, so assets are ($14.40 + $12.70 =) $27.10.

Thus the Return on Equity (ROE) of the firm equals:

ROE = profit margin × asset turnover × financial leverage
ROE = (0.29) × ($10.70 / $27.10) × ($27.10 / $12.70)
ROE = 0.244 = 24.4%
ROE will rise as asset turnover rises.

The SGR of the firm equals:

SGR = retention rate x ROE
SGR = (1 – 0.10) × 0.244
SGR = 0.90 × 0.244
SGR = 0.22
The SGR of the firm is approximately 22%.
SGR will increase as rising asset turnover increases ROE.

7.Free cash flow to equity models (FCFE) are most appropriate when estimating the value of the firm:

A)   to creditors of the firm.

B)   to equity holders.

C)   only for non-dividend paying firms.

D)   in the mature stage of the industry cycle.

The correct answer was B)

FCFE models attempt to estimate the value of the firm to equity holders. The models take in to account future cash flows due to others, including debt and taxes, and amounts required for reinvestment to continue the firm’s operations.