The most recent financial statements for Shinoda ManufacturingCo. are shown below: Income StatementBalance...

The most recent financial statements for Shinoda Manufacturing Co. are shown below:

Income Statement			Balance Sheet
Sales	$	64,300	Current assets	$	28,500	Debt	$	44,700
Costs		44,630	Fixed assets		81,400	Equity		65,200
Taxable income	$	19,670	Total	$	109,900	Total	$	109,900
Tax (40%)		7,868
Net Income	$	11,802

Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 44 percent dividend payout ratio. No external equity financing is possible.

What is the sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Sustainable growth rate %

Solutions

Expert Solution

- Net Income = $11,802

Total Equity = $65,200

Return on Equity(ROE) = Net income/Total Equity

ROE = $11,802/$65,200

ROE = 18.10%

- Retention ratio(b) = 1 - Dividend Payout ratio = 1 - 0.44 = 56%

- Sustainable Growth Rate = (ROE*b)/1- (ROE*b)

Sustainable Growth Rate = (18.10%*0.56)/1 - (18.10%*0.56)

Sustainable Growth Rate = (10.136687%)/1 - (10.136687%)

Sustainable Growth Rate = 11.28%

jeff jeffy answered 2 years ago

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