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Unformatted text preview: Growth in Equity from Plowback: Plowback Ratio ROE Du Pont System: ROA = + Assets Total Average Sales Sales Interest Income Net x ROE = + Interest Income Net Income Net Equity Average Assets Total Average x ROA x Basic PV FV Formula: K r) (1 PV FV + = PV of Perpetuity: = r C PV of Growing Perpetuity: = g r C 1 (r = required return; g = perpetuity growth rate) PV of Annuity: = + n r) (1 1 r C 1 FV of Annuity: = (PV of Annuity) x ( ) n r 1 + = ( ) [ ] 1 r 1 r C n + PV of Growing Annuity: = + + n r 1 g 1 g r C 1 FV of Growing Annuity: = + + g r g) (1 r) ( C n n 1 Effective Annual Rate (EAR): = K APR 1 K 1 + where K = # compounding periods per year Real Rate of Return: 1 Rate Inflation 1 Rate Nominal 1 + + =...
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