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
%
ROE=Profit margin*Total Asset Turnover*Equity multiplier
=(0.052*2.24*1.71)=0.1991808
Retention ratio=1-payout ratio
=(1-0.49)=0.51
Sustainable Growth Rate=(ROE*Retention ratio)/[1-(ROE*Retention ratio)]
=(0.1991808*0.51)/[1-(0.1991808*0.51)]
which is equal to
=11.31%(Approx).
Assume the following ratios are constant. Total asset turnover = 2.24 Profit margin = 5.2 %...
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