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QUESTION SIX a. During 2009, Gamma Corp had sales of $300 million, a net profit margin of 8% and a dividend payout ratio of 30%.

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QUESTION SIX a. During 2009, Gamma Corp had sales of $300 million, a net profit margin of 8% and a dividend payout ratio of 30%. At the end of the year, its total assets amounted to $500 million while its total debt was $200 million Calculate Gamma's return on equity (ROE) and its sustainable growth rate (g*). Employ the DuPont system of financial ratios to arrive at your response. b. Suppose now that Gamma expects to maintain similar asset, sales and debt profiles but that, duc to a cost savings initiative, the company expects to earn an additional $3 million in after tax income, all of which will be paid out in dividends. Recalculate Gamma's return on equity (ROE) and its sustainable growth rate (g*). Once again, employ the DuPont system of financial ratios to arrive at your response. How did your calculations differ in a, and b. and why

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