The corporation's return on equity of 1 1 19% and a dividend payout ratio of 20...

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Question

Answer 1

Answer #1

Sustainable rate of Growth:

It is a maximum rate of growth that a company can sustain without having to financial growth with additional equity or debt.

Formulae:

Sustainable rate of growth=Return on Equity (1-Dividend payout ratio)

=11.19% (1-20%)

=11.19%(1-20/100)

=11.19%(1-0.2)

=11.19%(0.8)

=11.19/100(0.8)

=0.1119(0.8)

=0.08952 {i.e; 8.952%)

Therefore 8.952 % is the correct answer .

Answer 2

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