Question

In: Finance

Johnson Products earned $4.30 per share last year and paid a dividend of $1.65 per share....

Johnson Products earned $4.30 per share last year and paid a dividend of $1.65 per share. If ROE was 16 percent, what is the sustainable growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Sustanable growth rate:

Solutions

Expert Solution

Sustainable growth rate = ROE * (1 - Dividend Payout Ratio)

Dividend Payout Ratio = Dividend/Earnings

Dividend payout ratio = $1.65/$4.30 = 0.3837

Sustainable growth rate = 16% * (1 - 0.3837) = 16% * 0.6163 = 9.86%


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