The following information relates to Yutter Corporation:
$\begin{array}{lr}&\text { Year } 1\
\text { Net income-year ended } 12 / 31 & \$ 12,500 \
\text { Dividends } & 3,000 \
\text { Return on net operating assets } & 13 \% \
\text { Return on equity } & 15 \% \
\text { Cost of equity } & 12 \%
\end{array}$
-What is Yutter's sustainable equity growth rate?

Question

The following information relates to Yutter Corporation:
 $\begin{array}{lr}&\text { Year } 1\
\text { Net income-year ended } 12 / 31 & \$ 12,500 \
\text { Dividends } & 3,000 \
\text { Return on net operating assets } & 13 \% \
\text { Return on equity } & 15 \% \
\text { Cost of equity } & 12 \%
\end{array}$
-What is Yutter's sustainable equity growth rate?

Quizplus · Accepted Answer

The sustainable equity growth rate is calculated using the formula: Return on Equity (ROE) * (1 - Dividend Payout Ratio). The Dividend Payout Ratio is Dividends/Net Income = 3,000/12,500 = 0.24. Therefore, the sustainable growth rate is 15% * (1 - 0.24) = 11.4%.

The Following Information Relates to Yutter Corporation -What Is Yutter's Sustainable Equity Growth Rate? A)9

The Following Information Relates to Yutter Corporation -What Is Yutter's Sustainable Equity Growth Rate?
A)9