A company has a return on equity of 14.2 percent and a dividend payout ratio of 60 percent. What is the sustainable growth rate?

Question

Quizplus · Accepted Answer

The sustainable growth rate can be calculated using the formula: Sustainable Growth Rate = Return on Equity (ROE) * (1 - Dividend Payout Ratio). Given an ROE of 14.2% and a dividend payout ratio of 60%, the calculation is: 14.2% * (1 - 0.60) = 14.2% * 0.40 = 5.68%.

A Company Has a Return on Equity of 14