If a company has an ROE of 7% and a dividend payout ratio of 25%, its sustainable growth is closest to:

Name: If a company has an ROE of 7% and a dividend payout ratio of 25%, its sustainable growth is closest to:
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The sustainable growth rate can be calculated using the formula: Sustainable Growth Rate = ROE * (1 - dividend payout ratio). Here, ROE = 7% and the dividend payout ratio = 25%, so the sustainable growth rate = 7% * (1 - 0.25) = 7% * 0.75 = 5.25%, which is closest to 5.3%.

If a Company Has an ROE of 7% and a Dividend