A Firm Had Earnings Per Share of $3

question 9

Multiple Choice

A firm had earnings per share of $3.25 for the year.The book value per share at the beginning of the year was $13.The firm paid out $.975 in dividends per share at the end of the year.If the rate of return on book value remains constant from year to year,and the firm maintains the same earnings retention ratio,what will the sustainable growth rate be for the foreseeable future?

• A)35.7%
• B)7.5%
• C)8.3%
• D)17.5%
• E)25%

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Definitions:

Current Assets

Items of value that are likely to be cashed in, sold off, or used up within a twelve-month period or during the standard operational cycle of a company.

Gross Profit

The financial metric representing the difference between revenues and the cost of goods sold, indicating the basic profitability of a company's core operations.

Operating Expenses

Costs associated with running a business's day-to-day operations, excluding costs related to producing goods or services.

Inventory System

A system for tracking a company's goods and materials, managing the process of ordering, storing, and using the company's inventory.