Assume the following ratios are constant: Total asset turnover3.0 Profit margin5.9% Equity multiplier...

Assume the following ratios are constant:


Total asset turnover	3.0
Profit margin	5.9	%
Equity multiplier	1.5
Payout ratio	35	%

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.)

Expert Solution

Total asset turnover= 3.0

Profit margin= 5.9 %

Equity multiplier =1.5

Payout ratio =35 %

Return on Equity= Total asset Turnover*Profit Margin* Equity Multipler

= 3.0*5.9%*1.5

= 0.2655

Sustainable growth rate = return on equity× (1- dividend payout ratio).

= 0.2655(1-35%)

=17.26% (Answer).

jeff jeffy answered 2 years ago

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