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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?

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    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

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