1. For the firm selected for Part A, calculate its internal growth rate for the last fiscal year:

= (ROA ? RR) / [1-(ROA ? RR)

2. Calculate the firms sustainable growth rate for the last fiscal year:

= (ROE ? RR) / [1-(ROE ? RR)

OHNSON & OHNSON Name of The Company Ticker Symbol WACC Cost Of Debt iD (Interest Expense /latest two-year average debt)- UNJ (NYSE) 2.85% $552,000,000/$19.31B Corporate Tax Tc 2 year Average Tax Rate [(3,787,000/19,196,000)+4,240,000 20.18% /20,563,000))/2 Total Debt D 2 year average Short-Term Debt and Long-Term Debt Short term Debt = (7,004,000 +3,638,000/2) Long Term Debt = (12,857,000 + 15,122,000/2 Total Debt D Total Equity E Total Firm Value V(D+E) Cost of Equity iE using CAPM calculated Below $5.32 Billions S13.99 Billions $19.31Billions 34317 Bilions 362.48 Billions 9.40% Beta Market Return iM Risk Free rate Rf Cost of Equity = iF + Beta x (iM-rh-3% + .80 x(11%-396) 0.8 11.00% 3.00% 9.40% Weight of Equity = E/(E+D) Weighted Average Cost Of Equity = (94.67% x 9.40%) Weight Of Debt = D/(E+ D) Pretax weighted average cost of debt = 5.33% x 2.86% After tax weighted average cost of Debt = 0.15%"(120.18%) WACC= 8.90% + 12% 94.67% 8.90% 5.33% 0.15% 0.12% 9.02%