Problem

Sustainable Growth Rate [LO3] Coheed. Inc., had equity of $135,000 at the beginning of the...

Sustainable Growth Rate [LO3] Coheed. Inc., had equity of $135,000 at the beginning of the year. At the end of the year, the company had total assets of $250,000. During the year, the company sold no new equity. Net income for the year was $19,000 and dividends were $2,500. What is the sustainable growth rate for the company? What is the sustainable growth rate if you use the formula ROE × b and beginning of period equity? What is the sustainable growth rate if you use end of period equity in this formula? Is this number too high or too low? Why?

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