we have to first compute the ROE | |||||||
we know that- | |||||||
Sustainable growth rate = | ROE* retention ratio/(1- ROE* retention ratio) | ||||||
retention ratio = 1- dividend pay out ratio = 1-32% | 68.00% | ||||||
therefore, we have- | |||||||
9% = | =ROE*68%/(1-ROE*68%) | ||||||
=0.09- 0.68*.09*ROE = | 0.68ROE | ||||||
=0.09 = | 0.7412*ROE | ||||||
ROE = | 12.14% | ||||||
Using DUPONT formula we have | |||||||
ROE = | Profit margin * Asset turnover ratio*equity multiplier | ||||||
12.14% | = | Profit margin * (1/1.34)*(1.41) | |||||
Profit margin = | =12.14%/((1/1.34)*1.41) | ||||||
Profit margin = | 11.54% |
Fulkerson Manufacturing wishes to maintain a sustainable growth rate of 9 percent a year, a debt-equity...
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What is the Sustainable growth
rate?
Sig, Inc., wishes to maintain a growth rate of 12 percent per year and a debt-equity ratio of 43. The profit margin is 5.9 percent, and the ratio of total assets to sales is constant at 1.80 What dividend payout ratio is necessary to achieve this growth rate under these constraints? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded...