6. Baggai Enterprises (a fictional company) has an ROA of 10%, retains 30% of earnings, and has an equity multiplier of 1.25. Mondale Enterprises also has an ROA of 10%, but it retains two-thirds of earnings and has an equity multiplier of 2.00. What are the sustainable dividend growth rates for (A) Baggai Enterprises and (B) Mondale Enterprises? D = D0(1 + g) = $2.50(1.30) = $3.25 D2 = Do(1 + g) = $2.50(1.30) = $4.225 D3 = D0(1 + g) = $2.50(1.30) = $5.493 D4 = D0(1 + g)4 = $2.50(1.30)4 = $7.140 D5 = Do(1 + g)5 = $2.50(1.30)5 = $9.282 D6 P = 1= g CAPM: 1 = 0.05 + (1.2 x 0.06) = 0.122 16 P5 = = D5 (1+ g) 16 = = $9.282 x 1.07 = $9.932 $9.932 1-g 0.122 -0.07 = $191.00 CF = 0; CF = 3.25; CF2 = 4.225; CF3 = 5.493; CF4 = 7.140; CF5= 1 = 9.282+ 191.00 200.282 I = 12.2; NPV = 127.28