Marcie's Mercantile wants to maintain its current dividend policy, which is a payout ratio of 40 percent. The firm does not want to increase its equity financing but are willing to maintain its current debt-equity ratio. Given these requirements, the maximum rate at which Marcie's can grow is equal to:

Question

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The sustainable rate of growth is the maximum rate at which a company can grow its earnings, dividends, and sales without increasing its debt or issuing new equity, assuming it maintains its current dividend payout ratio and debt-equity ratio. Since Marcie's Mercantile wants to maintain its current dividend policy and debt-equity ratio without increasing equity financing, the correct answer is the sustainable rate of growth.

Marcie's Mercantile Wants to Maintain Its Current Dividend Policy, Which