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1) Genentech Inc. is California-based biotech pioneer just acquired by Swiss pharmaceutical giant Roche Holding AG. Roche paid= $46.8 billion in cash for 44% of Genentech it didn’t already own, implying market value of over= $100 billion for whole company. For look at Genentech’s recent sustainable growth challenges, consider the following selected financial data.

                                      2003  2004  2005  2006  2007

Profit margin (%)            17.0     17.0   19.3   22.8   23.6
Retention Ratio (%)        100.0   100.0  100.0 100.0 100.0
Asset turnover (%)         .38        .49      .55    .63      .62
Financial leverage (%)    1.64      1.44     1.79   1.99   2.00
Growth rate in sales (%) 26.1      40.0     43.5   40.0    26.3

i) find out Genentech’s annual sustainable growth rate for years 2003–2007.

ii) Did Genentech face a growth management challenge during this period? Please describe briefly.

iii) How did Genentech cope with this challenge?

iv) Compute Genentech’s sustainable growth rate in 2007 supposing the asset turnover of= 0.72 times. Compute sustainable growth rate in 2007 supposing a financial leverage of= 2.20 times. Compute sustainable growth rate in 2007 supposing both of these changes occur.

Basic Finance, Finance

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