Purchase Solution

Finding sustainable growth and bond price

Not what you're looking for?

Ask Custom Question

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?

Purchase this Solution
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.

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 provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Lean your Process

This quiz will help you understand the basic concepts of Lean.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

Basics of corporate finance

These questions will test you on your knowledge of finance.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

View More Free Quizzes
Related BrainMass Solutions

  • Bonds, Returns, Growth, Dividends and Percentage of Sales

    134752 Bond Returns, Rate of Return, Constant-Growth Model, Dividends and Taxes, Dividends and Repurchases, Sustainable Growth, Percentage of Sales Question One: Bond Returns.

  • Finance Questions

    PVIFA is the annuity table and PVIF is the lump sum table for finding the present value.

  • Bond Valuation,Price,Yields & Common Stock Value

    273051 Computation of Bond prices and yields;Basic bond valuation & Common stock value - Constant Growth 1. Bond prices and yields.

  • Stock and bond returns

    Stock ABC is considered to be a growth stock with a non-constant growth rate of 18% for the next five years, followed by 15% sustainable annual growth from thereafter.

  • Valuation

    However, finding yield to maturity by trial and error would be a tedious, time-consuming process. It would be easier to use a financial calculator. Here is the set up.

  • Determining the Interest Rates and Valuation of Financial Derivatives

    b) What is the option's time premium at this price? 4. Calculate the sustainable growth based on the following information: •Earnings after taxes = $23,000. •Equity = $110,000. •d=48.7% 5. Valuation - convertible bond.

  • Weighted average cost of capital

    cost of capital by finding WACC as follows: - WACC is the weighted average cost of capital whereby the target proportions of debt and equity along with the component costs of capital are used to calculate.

  • Expected sustainable growth rate, market P/E, price increase

    Price = EPS X P/E = 1.5X47.82 = $71.74 The solution explains the calculation of expected sustainable growth rate, market P/E and price increase

  • Business Growth and Finance

    118860 Business Growth and Finance 1. What is the sustainable growth rate of a firm with the following selected financial results?

View More Related Solutions