BC200402941

Solution No 1: -

Data: -
Debt – equity Ratio = 0.4 = 1+ 0.4 = 1.4
Profit Margin = 4%
Divided Payout Ratio = 50 %
Retention Ratio (b) = 1 – 0.5 = 0.5
Total Asset Turn Over = 1
Find: -
ROE =? g =?
Solve
Using Formula
ROE = Profit Margin x Total Asset Turn Over x Debt – equity Ratio
ROE = 4% x 1 x 1.4
ROE = 5.6 % / 100 = 0.056
Now
g = Retention Ratio x ROE
g = 0.5 x 0.056
g = 0.0288 x 100 = 2.88%

Solution No 2: -
Data: -
Future Value = Rs 700,000
Present Value = Rs 300,000
Time = 6 Years
Interest Rate = r =?
Using Formula

Solve

Rs 700,000 = Rs 300,000

2.33 =

4.096 = 1 + r
r = 4.096 -1
r = 3.096