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Andrej [43]
3 years ago
5

Johnson Products earned $5.08 per share last year and paid a dividend of $2.00 per share. If ROE was 13 percent, what is the sus

tainable growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Business
1 answer:
olganol [36]3 years ago
8 0

Answer:

7.88%

Explanation:

Given that,

Dividend earned last year = $5.08 per share

Dividend paid = $2.00 per share

Return on equity, ROE = 13 percent

Retention ratio:

= (Dividend earned last year - Dividend paid) ÷ Dividend earned last year

= ($5.08 - $2.00) ÷ $5.08

= $3.08 ÷ $5.08

= 0.6062

Sustainable growth rate:

= Retention ratio × Return on equity

= 0.6062 × 0.13

= 0.078806 or 7.88%

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When frank sells a pie to jean instead of sarah, the economic value created in society is lower because of the difference in consumer surplus.

What is consumer surplus?

Consumer surplus occurs when a consumer pays a price that is lesser for a goods than the actual price they are willing to pay for a product.

Difference in consumer surplus occurs because Frank now has more customers and he can now sell at a price lower than the consumer would pay.

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Learn more on consumer surplus here,

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2 years ago
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