Martin's Lumber has a profit margin of 7 percent and a dividend payout ratio of 30 percent.The total asset turnover is 0.90,and the debt-equity ratio is 0.45.What is the sustainable rate of growth?

Question

Quizplus · Accepted Answer

Return on equity = 0.07 × 0.90 × (1 + 0.45)= 0.09135
Sustainable growth = [0.09135 × (1 - 0.30)] / {1 - [0.09135 × (1 - 0.30)]} = 0.0683,or 6.83%

Martin's Lumber Has a Profit Margin of 7 Percent and a Dividend