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?
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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.
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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?
Sustainable Growth Rate = ROE x (1 - dividend-payout ratio); where ROE is Return on Equity
ROE = Profit ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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