A company has a return on assets of 10.8 percent and a return on equity of 17.2 percent. If the company has a dividend payout ratio of 30 percent, what is the sustainable growth rate?

Question

Quizplus · Accepted Answer

The sustainable growth rate (SGR) is calculated using the formula: SGR = ROE * (1 - Dividend Payout Ratio). Here, ROE is 17.2% and the Dividend Payout Ratio is 30%, so SGR = 17.2% * (1 - 0.30) = 12.04%.

A Company Has a Return on Assets of 10