A firm has a retention ratio of 45 percent and a sustainable growth rate of 6.2 percent.The capital intensity ratio is 1.2 and the debt-equity ratio is 0.64.What is the profit margin?

Name: A firm has a retention ratio of 45 percent and a sustainable growth rate of 6.2 percent.The capital intensity ratio is 1.2 and the debt-equity ratio is 0.64.What is the profit margin?
Brand: Quizplus
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Question

Quizplus · Accepted Answer

0.062 = [ROE × 0.45]/[1 - (ROE × 0.45)]; ROE = .1297340.129734 = PM × (1/1.2) × (1 + .64); PM = 9.49 percent

A Firm Has a Retention Ratio of 45 Percent and a Sustainable