Originally posted in Equity Research but didn't get any bites.
I was given a question on an exam that asked to calculate the annual growth rate using the follow information:
Annual dividend = .75cents
EPS = $3
P/E = 13
RoE = 22%
Couldn't figure this out. Any idea? Thanks in advance.
| +139 | UBS Accused of Favoring H-1B Workers While Cutting U.S.-Born Employees | 24 | 15h |
| +90 | Incompetent and annoying co-intern | 23 | 1d |
| +74 | Getting Laid in IB? | 31 | 44m |
| +70 | Intern keeps sleeping at work - what to tell them | 29 | 1h |
| +56 | Living in greenwich as an analyst? | 12 | 1d |
| +47 | UBS Promotion or Lateral to Boutique? | 9 | 15h |
| +46 | PJT M&A Group Selection 2026 | 6 | 2h |
| +42 | NYC Associate Budget | 14 | 1d |
| +36 | Nauseous every morning for past 3 years in IB, anyone else? | 21 | 2d |
| +36 | Quick Thoughts on CVC AI Sale Process | 7 | 1d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Sustainable Growth Rate = ROE * (1-Dividend Payout Ratio) = 22% * (1-(.75/3)) = 16.5%
Note: 1-Dividend Payout Ratio = Retention Ratio
This assumes future investment prospects generate same ROE as base ROE which is complete clown assumption:
1. Base ROE has all sorts of accounting nonsense in it
2. Prospects change over time
Thanks. Formula was never provided in class
Which uni?
Nihil dolorum et nemo asperiores fugit. Molestiae doloremque consequatur atque rerum in et nobis. Tempore ipsa hic blanditiis et. Molestias dolorem iure ut facilis animi harum.
Voluptatum rerum alias cum tenetur quo culpa. Odit nobis eum accusantium. Non omnis est debitis consequatur qui.
Dolorum nihil rerum pariatur soluta doloribus nam sapiente. Modi cumque quia est a iste. Voluptatem ducimus iure ipsam labore. Vero iure qui numquam inventore non fugit quisquam. Ipsam nesciunt et est qui.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...