Equity net, share, income, growth

himanshumh

Price $40
Growth rate 12 for 3 yrs ther after 2.5
P/E 22
ROA 5.5
Equity multiplier (Assets/Equity) 1.8
net income $256 million
div. per share .73

sustainable growth rate is:
a. 4 %
b. 5.9%
c. 16.5%

SFoyil

b, quite easy

ap0258

b.

NI (EPS) = 40/22 = 1.81818
ROE = NI/Assets * Assets/Equity - - -> 5.5*1.8 = 9.9
g = Retention Rate * ROE - - -> (1-(0.73/1.818)) * 9.9 = 5.925

luda002

dam if all the questions were like this, would make life so much easier.



Edited 1 time(s). Last edit at Friday, May 21, 2010 at 02:56PM by vinniepaz730.

neil1234

yes its b.

yodacaia

b also.

sust growth rate=Retention Rate *ROE
ROE=ROA*Eq multiplier
Earnings=P/22

RR= 1- div/earnings

Swanand

Answer: b - 5.9%

ROE = ROA x Equity Multiplier = 5.5 x 1.8 = 9.9%

EPS = PPS / P/E = 40/22 = 1.81

b = 1 - Div per share/EPS = 1 - 0.73/1.81 = 60%

g = ROE x b = 9.9 x 0.60 = 5.94%

troymo

b.

Use P/E to find EPS. Use Div to find retention ratio.
Ten find ROE from Dupont.

bolligerallstar

"Growth rate 12 for 3 yrs ther after 2.5"

What does this mean?