b. Mexican Motors has generally earned about 12% on book equity (ROE = 12%) and reinvested 50%
Question:
b. Mexican Motors has generally earned about 12% on book equity (ROE = 12%) and reinvested 50% of earnings. The remaining 50% of earnings has gone to free cash flow. Suppose the company maintains the same ROE and investment rate for the long run. What is the implication for the growth rate of earnings and free cash flow? For the cost of equity?
Should you revise your answer to part
(a) of this question?
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Related Book For 
Principles Of Corporate Finance
ISBN: 9781264080946
14th Edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen, Alex Edmans
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