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# Finding sustainable growth and bond price

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1) The Green Giant has a 5% profit margin and a 40% divided payout ratio. The total asset turnout is 1.40 and the equity multiplier is 1.50. What is the Sustainable rate of growth?

2) Consider a bond which pays 7% semiannually has 8 years to maturity. The market requires an interest rate of 8% on bonds of this risk. What is the bond's price?

#### Solution Preview

1)The Green Giant has a 5% profit margin and a 40% divided payout ratio. The total asset turnout is 1.40 and the equity multiplier is 1.50. What is the Sustainable rate of growth?

Sustainable Growth Rate = ROE x (1 - dividend-payout ratio); where ROE is Return on Equity

ROE = Profit ...

#### Solution Summary

There are two problems. Solution to first problem describes the steps for finding sustainable growth rate.
Solution to second problem describes the steps to determine price of a bond.

\$2.49