a company has ROE of 22% and last year had $450 million in net income. it...

a company has ROE of 22% and last year had $450 million in net income. it has 200 million shares outstanding and paid a dividend of $.7 per share. what is the company's sustainable growth rate?

Expert Solution

Given about a company,

ROE = 22%

Net income = $450 million

number of shares = 200 million

=> Earning per share = NI/number of shares = 450/200 = $2.25

Dividend paid = $0.7

=> Retention ratio = (1-Dividend/earning) = (1-0.7/2.25) = 68.89%

So, Sustainable growth rate = Retention rate*ROE = 68.89*0.22 = 15.16%

jeff jeffy answered 2 years ago

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