How do i solve this

CFA Level I
#1

How do i solve this Return on Assets 10% Profit margin 5% debt ration 40% Pay ration 25% What the implied growth

#2

g=(.10*1.667)*.75=12.5?

#3

by the way, I am so frickin money right now I hardly know it…you know its true without even putting up multiple choices for me, just take that answer to the bank homey. ROA*leverage ratio (debt is 40%, equity must be 60%, assets/equity=1/.6=1.667) then multiply it by 1-payout ratio of 25%, and you got your infamous G

#4

net income / assets = 10% given assets/ equity = 40% debt, so therefore 60% equity = assets / equity = 1/.6 = 1.667 payout = .25 therefore retention = .75 ROE = ROA * Leverage = .10 * 1.667 = 16.67% G = Retention * ROE G = .75 * 16.67% = 12.5%

#5

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#6

debt ration = .4 then equity ration = .6 a/e = 1/.6 roe = roa times d/e roe = .1 * 1.667 = .1667 rr = 1 - pay ration = .75 g = roe * rr g = 1.667 * .75 g = 12.5%

#7

arent you missing the asset trunover figure…cannot solve for g unless you solve for ROE first…seems like there is missing data

#8

oops

#9

ROAxd/e does not equal ROE, it has to be ROA x assets/equity…tvPM is right

#10

i edited it. sorry.

#11

without a way to solve for asset turnover, you cannot answer this question. Return on asset is simply net income over assets, which is not a component to the dupont.

#12

profit margin * asset to = roa so roe = roa * assets/equity

#13

mib-asset turnover is included in the ROA: ni/sales * sales/assets =ni/assets=ROA

#14

dupont is a decomposition of roe, not the formula to determine it, roe is just net income over equity, get there however you want

#15

ryanwtyler Wrote: ------------------------------------------------------- > profit margin * asset to = roa > > so roe = roa * assets/equity cool…thx