In the chapter, we discussed one calculation of the sustainable growth rate as Sustainable growth rate =
Question:
In the chapter, we discussed one calculation of the sustainable growth rate as Sustainable growth rate = ROE × b / 1 - ROE × b.
In practice, probably the most commonly used calculation of the sustainable growth rate is ROE × b. This equation is identical to the two sustainable growth rate equations presented in the chapter if the ROE is calculated using the beginning of period equity. Derive this equation from the equation presented in the chapter.
Step by Step Answer:
In the following derivations the subscript E refers to end of period numbers and the subscript B ref...View the full answer
Corporate Finance Core Principles and Applications
ISBN: 978-1259289903
5th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
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