Calculate genentechs annual sustainable growth rate

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Reference no: EM13892240

Genentech Inc. is a California-based biotech pioneer recently ac- quired by Swiss pharmaceutical giant Roche Holding AG. Roche paid
$46.8 billion in cash for the 44 percent of Genentech it did not al- ready own, implying a market value of over $100 billion for the entire company. For a look at Genentech's recent sustainable growth chal- lenges, consider the following selected financial data.

 

 

2003

2004

2005

2006

2007

Profit margin (%)

17.0

17.0

19.3

22.8

23.6

Retention ratio (%)

100.0

100.0

100.0

100.0

100.0

Asset turnover (X)

0.38

0.49

0.55

0.63

0.62

Financial leverage (X)

1.64

1.44

1.79

1.99

2.00

Growth rate in sales (%)

26.1

40.0

43.5

40.0

26.3

a. Calculate Genentech's annual sustainable growth rate for the years 2003-2007.

b. Did Genentech face a growth management challenge during this period? Please explain briefly.

c. How did Genentech cope with this challenge?

d. Calculate Genentech's sustainable growth rate in 2007 assuming an asset turnover of 0.72 times. Calculate the sustainable growth rate in 2007 assuming a financial leverage of 2.20 times. Calculate the sustainable growth rate in 2007 assuming both of these changes occur.

Reference no: EM13892240

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