Calculate the three components of the dupont formula

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Lauren Turk is reviewing Francesca Toy's financial statements in order to estimate its sustainable growth rate. Using the information presented in Exhibit 14.25:

a. (1) identify and calculate the three components of the DuPont formula.

(2) calculate the ROE for 2011, using the three components of the DuPont formula.

(3) calculate the sustainable-growth rate for 2011.

b. Turk has calculated actual and sustainable growth for each of the past four years and finds in each year that its calculated sustainable-growth rate substantially exceeds its actual growth rate. Cite two courses of action (other than ignoring the problem) that Turk should encourage Francesca Toy to take, assuming the calculated sustainable- growth rate continues to exceed the actual growth rate.

Text Book: Investment Analysis and Portfolio Management By Frank Reilly, Keith Brown.

Reference no: EM13924213

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