Problem 4-13 Sustainable Growth (LO3] Synyster Corp. has an ROE of 16 percent and a payout...

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Problem 4-13 Sustainable Growth (LO3] Synyster Corp. has an ROE of 16 percent and a payout ratio of 24 percent. What is its s

Answer 1

Answer #1

Sustainable Growth Rate = ROE * Retained Earnings Ratio / [1 - (ROE * Retained Earnings Ratio)]

Retained Earnings Ratio = 1 - Payout Ratio

= 1 - 0.24

= 0.76

Sustainable Growth Rate = 0.16 * 0.76 / [1 - (0.16 * 0.76)]

= 0.1216 / [1 - (0.1216)]

= 0.1216 / 0.8784

= 0.1384 or 13.84%

Therefore, sustainable growth rate is 13.84%.

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Answer 2

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