remember this question? lol. Wow bad memories. Anyway, not sure if we ever came to a conclusion on this but I’m pretty sure that was the correct answer even tho I picked Mature Growth. Transition phase is discussed in the discounted dividend valuation section in the Equity book. That vignette was also geared towards those questions which would make me believe even more that was the answer. Transition: In this Phase, which is a transition to maturity, earning growth slows because of market saturation. In this phase, earnings growth rates may be above average but declining toward the growth rate for the overall economy. Capital requirements typically decline in this phase, often resulting in positive free cash flow and increasing dividend payout ratios
where can we find information about the transition phase? I thought the answer last year was mature growth, but goes to show what I know
I put mature but I remember it saying paying a dividend and high ROE which would relate to the transition phase. "this phase, earnings growth rates may be above average " “often resulting in positive free cash flow and increasing dividend payout ratios” It’s irrelevant now. It’s on pg 330 in the equity book
schweser has a nice chart on this ROE > r: 3 stage- growth phase roe approaching r: 2 stage- transition roe = r: ggm Mature
But the question asked what stage of the industry life cycle… and transition is NOT one of the stages in the industry life cycle (pioneer, rapid accel growth, mature grown, stabilization / market maturity, decline)
hmm. Good point. If that’s what the question says then it can’t be transition. What a messed up question. Can’t figure it out a yr later lol. High ROE and pays a dividend 2 conflicting things.
agree…transition is not a stage of the industry life cycle
I don’t remember what I put. I hated this question though.
It was mature growth, without a doubt.