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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$28,500Debt$44,700
Costs
44,630
Fixed assets
81,400Equity
65,200
Taxable income$19,670
Total$109,900Total$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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