Deprey, Incorporated, had equity of $175,000 at the beginning of the year. At the end of the year, the company had total assets of $330,000. During the year, the company sold no new equity. Net income for the year was $37,000 and dividends were $5,000. a. What is the sustainable growth rate for the company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the sustainable growth rate if you use the formula ROE x b and beginning of period equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the sustainable growth rate if you use end of period equity in this formula? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. a. Sustainable growth rate 22.38% b. ROE x b (using beginning of period equity) 18.29 % c. ROE x b (using end of period equity) 15.46 %
Deprey, Incorporated, had equity of $175,000 at the beginning of the year. At the end of the year, the company had total assets of $330,000. During the year, the company sold no new equity. Net income for the year was $37,000 and dividends were $5,000. a. What is the sustainable growth rate for the company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the sustainable growth rate if you use the formula ROE x b and beginning of period equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the sustainable growth rate if you use end of period equity in this formula? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. a. Sustainable growth rate 22.38% b. ROE x b (using beginning of period equity) 18.29 % c. ROE x b (using end of period equity) 15.46 %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Deprey, Incorporated, had equity of $175,000 at the beginning of the year. At the end of
the year, the company had total assets of $330,000. During the year, the company sold
no new equity. Net income for the year was $37,000 and dividends were $5,000.
a. What is the sustainable growth rate for the company? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2 decimal places, e.g.,
32.16.)
b. What is the sustainable growth rate if you use the formula ROE x b and beginning of
period equity? (Do not round intermediate calculations and enter your answer as a
percent rounded to 2 decimal places, e.g., 32.16.)
c. What is the sustainable growth rate if you use end of period equity in this formula?
(Do not round intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
Answer is complete but not entirely correct.
a. Sustainable growth rate
22.38%
b. ROE x b (using beginning of period equity)
18.29
%
c. ROE x b (using end of period equity)
15.46
%
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