Reading 41: Discounted Dividend Valuation- LOS o(part2)～ equity, return, current, expression

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LOS o, (Part 2): Demonstrate the use of the DuPont analysis of return on equity in conjunction with the sustainable growth rate expression.

Q1. If a firm has a return on equity of 15%, a current dividend of $1.00, and a sustainable growth rate of 9%, what are the firm’s current earnings?

A)   $1.50.

B)   $1.75.

C)   $2.50.

 

Q2. Supergro has current dividends of $1, current earnings of $3, and a sustainable growth rate of 10%. What is Supergro’s return on equity?

A)   12%.

B)   20%.

C)   15%.

 

Q3. If Cantel, Inc., has current earnings of $17, dividends of $3.50, and a sustainable growth rate of 11%, what is its return on equity (ROE)?

A)   17.64%.

B)   13.85%.

C)   11.91%.

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