Assume the following ratios are constant. Total asset turnover Profit margin Equity multiplier Payout ratio 2.34...

Question

Question

Answer 1

Answer #1

Sustainable Growth rate = Retention rate * Return on Equity

Retention Rate = 1 - Payout Ratio = 1 - 0.31 = 0.69

Profit margin = 6.2% = 0.062

Asset Turnover = 2.34

Equity Multiplier = 1.81

According to Dupont Formula,

Return on Equity = Net Profit margin * Asset Turnover * Equity Multiplier = 0.062*2.34*1.81 = 0.2626

Hence, Sustainable Growth rate = Retention rate * Return on Equity = 0.69*0.2626 = 0.1812 or 18.12%

Answer 2

Similar Homework Help Questions

Assume the following ratios are constant. Total asset turnover = 2.34 Profit margin = 6.2 %...

Assume the following ratios are constant. Total asset turnover = 2.34 Profit margin = 6.2 % Equity multiplier = 1.81 Payout ratio = 31 % What is the ROE? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) ROE % What is the sustainable growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Sustainable growth rate %
The answer is not 18.12 Assume the following ratios are constant. Total asset turnover Profit margin...

The answer is not 18.12 Assume the following ratios are constant. Total asset turnover Profit margin Equity multiplier Payout ratio 2.34 6.2% 1.81 31% What is the sustainable growth rate? (Do not round intermediate calculatic Sustainable growth rate 18.12%
assuming the following ratios are constant total assets turnover=2.34% profit margin=6.2% equity multiplier=1.81% payout ratio= 31%...

assuming the following ratios are constant total assets turnover=2.34% profit margin=6.2% equity multiplier=1.81% payout ratio= 31% what is the sustainable growth rate?

Assume the following ratios are constant: Total asset turnover 3 Profit margin 5.9 % Equity multiplier...

Assume the following ratios are constant: Total asset turnover 3 Profit margin 5.9 % Equity multiplier 1.5 Payout ratio 35 % What is the sustainable growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Sustainable growth rate %
Assume the following ratios are constant: Total asset turnover 2.25 Profit margin 5.3% Equity multiplier 1.72...

Assume the following ratios are constant: Total asset turnover 2.25 Profit margin 5.3% Equity multiplier 1.72 Payout ratio 50% What is 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.)
Assume the following ratios are constant. Total asset turnover = 2.24 Profit margin = 5.2 %...

Assume the following ratios are constant. Total asset turnover = 2.24 Profit margin = 5.2 % Equity multiplier = 1.71 Payout ratio = 49 % What is 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.) Sustainable growth rate %

Assume the following ratios are constant: Total asset turnover 2.70 Profit margin 6.7 % Equity multiplier...

Assume the following ratios are constant: Total asset turnover 2.70 Profit margin 6.7 % Equity multiplier 2.00 Payout ratio 22 % What is the sustainable growth rate?
Assume the following ratios are constant: Total asset turnover 2.5 Profit margin 6.5% Equity multiplier 1.60...

Assume the following ratios are constant: Total asset turnover 2.5 Profit margin 6.5% Equity multiplier 1.60 Payout ratio 20% What is the sustainable growth rate?
myCoyote Homework 2 work 2 Assume the following ratios are constant: Total asset 2.90 turnover Profit...

myCoyote Homework 2 work 2 Assume the following ratios are constant: Total asset 2.90 turnover Profit margin Equity multiplier Payout ratio 5.2% 1.10 35% ok What is 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.) ces Sustainable growth rate

Loreto Inc. has the following financial ratios: asset turnover-2.00; profit margin 896; payout ratio-40%; equity/assets-0.60. a....

Loreto Inc. has the following financial ratios: asset turnover-2.00; profit margin 896; payout ratio-40%; equity/assets-0.60. a. What is Loreto's sustainable growth rate? (Do not round Intermedlate calculations. Enter your answers as a percent rounded to 2 decimal places.) Sustainable growth rate b. What is its internal growth rate? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Internal growth rate