If a venture has a return on assets ROA) = 10%, an equity multiplier based on beginning equity = 4.0 times, and a dividend payout ratio of 60%, the sustainable growth rate would be:
A) 10%
B) 16%
C) 20%
D) 24%
E) 40%

Question

Quizplus · Accepted Answer

The sustainable growth rate (SGR) is calculated using the formula: SGR = ROA * (1 - Dividend Payout Ratio) * Equity Multiplier. Substituting the given values: SGR = 10% * (1 - 0.60) * 4 = 16%.

If a Venture Has a Return on Assets ROA) =