Question

Question

If the Hunter Corp. has an ROE of 18 and a payout ratio of 26 percent, what is its 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-  Sustainable growth rate % ______________

Question

If Wilkinson, Inc., has an equity multiplier of 1.47, total asset turnover of 1.6, and a profit margin of 5.7 percent, what is its ROE? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer - ROE % ___________________

Answer 1

1

b = 1 – .26=.74

Sustainable growth rate = (ROE × b ) / [1 – (ROE × b )]

Sustainable growth rate = [.18(.74)] / [1 – .18(.74)]

Sustainable growth rate = 15.37%

2

ROE = (Profit Margin)*( total asset turnover)*(equity multiplier)
ROE =5.7%*1.6*1.47
ROE =13.41%