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Assume the following table provides summary data for Darden Restaurants Inc. ( in millions ) . Analysts will often use the observed PB ratio to
Assume the following table provides summary data for Darden Restaurants Inc. in millions Analysts will often use the observed PB ratio to infer market expectations
regarding a company's future performance under various assumptions. Round your answers to one decimal place.
a Assume that the market's expectations of future ROE and the discount rate are and respectively. Solve for the implied growth rate.
b Assume that the market's expectations of future ROE and the growth rate are and respectively. Solve for the implied discount rate.
c Assume that the market's expectations of the discount rate and the growth rate are and respectively. Solve for the implied future ROE.
d Do the market expectations implied from the results of parts a through c seem reasonable?
The expectations from b will be difficult to obtain since the implied discount rate is higher than the growth rate.
The expectations from c will be difficult to obtain since the implied future ROE is lower than past ROE.
no The expectations for all parts are reasonable and easy to obtain.
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