Question

In: Finance

calculate the sustainable earnings growth rate of a firm with ROE of 17.2% and earnings retention...

calculate the sustainable earnings growth rate of a firm with ROE of 17.2% and earnings retention rate of 0.5

Solutions

Expert Solution

Information provided:

Return on equity= 17.2%

Retention rate= 0.50

Sustainable growth rate= Return on equity* Retention rate

                                              = 0.172*0.50

                                              = 0.0860*100

                                              = 8.60%.

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