Sustainable Growth Rate Last year Umbrellas Unlimited Corporation had an ROE of 17.3% and a dividend...

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Sustainable Growth Rate Last year Umbrellas Unlimited Corporation had an ROE of 17.3% and a dividend...

Sustainable Growth Rate Last year Umbrellas Unlimited Corporation had an ROE of 17.3% and a dividend payout ratio of 39.2%. What is the sustainable growth rate?

A. 21.90%

B. 10.52%

C. 32.42%

D. 11.75%

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Answer 1

Answer #1

D. 11.75%

Sustainable growth rate = [0.173 × (1 – 0.392)] / {1 – [0.173 × (1 – 0.392)]}

Sustainable growth rate = 0.1175 or 11.75%

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Answer 2

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