The Hi-Lite Corp. had a profitable year and their ROE was 14.4%. The company paid out $1.20 of their earnings of $3.00 for the year. What is Hi-Lite's sustainable growth?

Name: The Hi-Lite Corp. had a profitable year and their ROE was 14.4%. The company paid out $1.20 of their earnings of $3.00 for the year. What is Hi-Lite's sustainable growth?
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Question

Quizplus · Accepted Answer

Sustainable Growth Rate = (ROE x (1 - Dividend Payout Ratio))
= (0.144 x (1 - 0.4)) 
= 0.086 or 8.6%