Calculate the sustainable growth rate given the following information: return on equity = 25%; payout ratio = 30%.
A) 21.21%
B) 22.32%
C) 23.43%
D) 24.54%
E) 25.65%

Question

Quizplus · Accepted Answer

The sustainable growth rate (SGR) is calculated using the formula: SGR = ROE * (1 - payout ratio). Here, ROE = 25% and payout ratio = 30%, so SGR = 25% * (1 - 0.30) = 25% * 0.70 = 17.5%. However, none of the options match this calculation, indicating a possible error in the question or options.

Calculate the Sustainable Growth Rate Given the Following Information: Return