Exhibit 14.5
Use the Information Below for the Following Problem(S)
$$\begin{array} { l c c }
& \text { Wal-Elue } & \text { Industry } \
\text { DPS } & 1.00 & 1.50 \
\text { Total As5et Tunover } & 3.20 & 2.50 \
\text { Net Profit Marpin } & 3.50 \% & 3.00 \% \
\text { EpS } & 4.00 & 3.00 \
\text { Total As5ets/Equity } & 3.00 & 4.00
\end{array}$$
-Refer to Exhibit 14.5.What are the expected sustainable growth rates for Wal-Blue and its industry?
A) 25.2% and 15.0%
B) 30.0% and 17.5%
C) 25.2% and 17.5%
D) 27.5% and 12.5%
E) 30.0% and 15.0%

Question

Exhibit 14.5
Use the Information Below for the Following Problem(S)
 $$\begin{array} { l c c } 
& \text { Wal-Elue } & \text { Industry } \
 \text { DPS } & 1.00 & 1.50 \
\text { Total As5et Tunover } & 3.20 & 2.50 \
\text { Net Profit Marpin } & 3.50 \% & 3.00 \% \
\text { EpS } & 4.00 & 3.00 \
\text { Total As5ets/Equity } & 3.00 & 4.00
\end{array}$$
-Refer to Exhibit 14.5.What are the expected sustainable growth rates for Wal-Blue and its industry?
A) 25.2% and 15.0%
B) 30.0% and 17.5%
C) 25.2% and 17.5%
D) 27.5% and 12.5%
E) 30.0% and 15.0%

Quizplus · Accepted Answer

g = ROE × RR = ROE × (1 - dividend payout)
g (Wal-Blue)= .336 × (1 - 1.00/4.00)= .336 × .75 = .252 or 25.2%
g (Industry)= .300 × (1 - 1.50/3.00)= .300 × .50 = .150 or 15.0%

Exhibit 14 -Refer to Exhibit 14