Reverse Engineering with the PB Ratio The following table provides summary data for Darden Restaurants Inc (in millions) Analysts will often use the observed PB ratio to infer market expectations regarding a companys future performance under various assumptions (Round your answers to one decimal place ) Market value of equity $14,286 Book value of equity $2,381 ROE (based on trailing 4 quarters) 27 9 EPS Growth (based on trailing 4 quarters) 15 7 (a) Assume that the markets expectations of future ROE and the discount rate are 22 and 5 5 , respectively Solve for the implied growth rate Answer (b) Assume that the markets expectations of future ROE and the growth rate are 22 and 3 , respectively Solve for the implied discount rate Answer (c) Assume that the markets expectations of the discount rate and the growth rate are 5 5 and 3 , respectively Solve for the implied future ROE Answer

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Question: Reverse Engineering with the PB Ratio The following table provides summary data for Darden Restaurants Inc. (in millions). Analysts will often use the observed PB

Reverse Engineering with the PB Ratio The following table provides summary data for Darden Restaurants Inc. (in millions). Analysts will often use the observed PB ratio to infer market expectations regarding a companys future performance under various assumptions. (Round your answers to one decimal place.)

Market value of equity	$14,286
Book value of equity	$2,381
ROE (based on trailing 4 quarters)	27.9%
EPS Growth (based on trailing 4 quarters)	15.7%

(a) Assume that the markets expectations of future ROE and the discount rate are 22% and 5.5%, respectively. Solve for the implied growth rate. Answer

% (b) Assume that the markets expectations of future ROE and the growth rate are 22% and 3%, respectively. Solve for the implied discount rate. Answer

% (c) Assume that the markets expectations of the discount rate and the growth rate are 5.5% and 3%, respectively. Solve for the implied future ROE. Answer

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