Question

You are given the following information on Kaleb's Welding Supply:

Profit margin			6.3	%
Capital intensity ratio			.72
Debt–equity ratio			.8
Net income		$	74,000
Dividends		$	15,600

Calculate the sustainable growth rate. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Please find below the solution .. Please do provide rating..

Sustainable growth rate = ROE*retention ratio/(1-ROE*retention ratio)
Profit margin	6.30%
Capital intensity ratio	0.72
Debt–equity ratio	0.8
Net income	74,000
Dividends	15,600
retention ratio = 1-(Dividend/net income)	78.92%
Asset turnover ratio = (1/Capital intensity ratio)	1.39
Sales = Net income/Profit margin	1174603
Total asset = (sales/Asset turnover ratio)	845714
Equity = (Total asset/(1+Debt-equity ratio))	469841
Return on equity = Net income/Equity	15.75%
Sustainable growth = 15.75%*78.92%/(1-15.75%*78.92%)	14.19%