GE has a return on equity of 20% and a dividend payout ratio of 25%. Its sustainable earnings growth rate is

Name: GE has a return on equity of 20% and a dividend payout ratio of 25%. Its sustainable earnings growth rate is
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Question

GE has a return on equity of 20% and a dividend payout ratio of 25%.  Its sustainable earnings growth rate is

Quizplus · Accepted Answer

The sustainable growth rate can be calculated using the formula: Sustainable Growth Rate = Return on Equity (ROE) * (1 - Dividend Payout Ratio). Here, ROE = 20% and Dividend Payout Ratio = 25%, so the calculation is 20% * (1 - 0.25) = 20% * 0.75 = 15%.

GE Has a Return on Equity of 20% and a Dividend