7. Sustainable Growth Assuming the following ratios are constant, what is the sustainable growth rate Total...

Question

Question

7. Sustainable Growth Assuming the following ratios are constant, what is the sustainable growth rate

Total asset turnover

=3.20

Profit marge

n

=7,4%

Equity multiplier

1.4

Payout ratio

=60%

Answer 1

Answer #1

ROE = (Profit Margin)(Asset Turnover)(Equity Multiplier)

ROE = (0.074)(3.20)(1.40)

ROE = 33.15%

Sustainable Growth Rate = (1 - Payout Ratio)ROE

Sustainable Growth Rate = (1 - 0.60)(0.3315)

Sustainable Growth Rate = 13.26%

Answer 2

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