myCoyote Homework 2 work 2 Assume the following ratios are constant: Total asset 2.90 turnover Profit...

Question

Question

Answer 1

Answer #1

Answer - Sustainable growth rate = 12.09%

Reason -

We must first calculate the ROE using the DuPont ratio to calculate the sustainable growth rate. The ROE is:

ROE=(Profit margin)(Total asset turnover)(Equity multiplier)

ROE=(.052)(2.9)(1.1)

ROE=.16588 or 16.588%

The plowback ratio is one minus the dividend payout ratio, so:

b= 1 – .35

b= .65

Now we can use the sustainable growth rate equation to get:

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

Sustainable growth rate= [.16588(.65)] / [1 – .16588(.65)]

Sustainable growth rate= 0.107822 / 0.892178

Sustainable growth rate = 0.1209 or 12.09%

If the solution helped, please give it a thumbs up. Thank you.

Answer 2

Similar Homework Help Questions

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 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 = 2.34 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 %

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

Assume the following ratios are constant. Total asset turnover Profit margin Equity multiplier Payout ratio 2.34 6.2% 1.81 3192 What is the sustainable growth rate? (Do not round Intermediate calculations and enter your answer as a percentre 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?
You are given the following information for Hendrix Guitars, Inc. Profit margin Total asset turnover Total...

You are given the following information for Hendrix Guitars, Inc. Profit margin Total asset turnover Total debt ratio Payout ratio 6.0% 1.8 41 20% Calculate 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 %

Loreto Inc. has the following financial ratios: asset turnover = 2.00; net profit margin (i.e., net...

Loreto Inc. has the following financial ratios: asset turnover = 2.00; net profit margin (i.e., net income/sales) = 4%; payout ratio = 35%; equity/assets = 0.30. a. What is Loreto's 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.)