Calculate the sustainable growth rate for Big Falls Timber given the following information.

Calculate the sustainable growth rate for Big Falls Timber given the following information. Dividend payout ratio is 30%; Tax rate is 21%; Total debt is $424,500 and Total assets are $913600; Profit Margin ratio is 11.08%; and Sales of $848,375.45

Expert Solution

Sustainable growth rate, g = ROE * (1 - Dividend payout ratio)

ROE = Net income/Sales

Net income = Profit Margin * Sales

Net income = 0.1108 * 848,375.45

Net income = 93,999.99986

ROE = Net income/Sales

ROE = 93,999.99986/848,375.45

ROE = 0.1108

g = ROE * (1 - Dividend payout ratio)

g = 0.1108 * 0.70

g = 0.07756

g = 7.756%

The sustainable growth rate, g = 7.756%

jeff jeffy answered 2 years ago

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