Homework Answers
Retention Ratio = (Net Income - Dividend) / Net Income
= (12 - 4) / 12
= 66.67%
OR
Retention Ratio = 100 - Payout Ratio
= 100 - 33.33%
= 66.67%
Return on Equity = 15%
Sustainable Growth Rate = Retention Rate * Return on Equity
= 0.6667 * 0.15
Sustainable Growth Rate = 0.10 or 10%
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