If Merton Corp. has a ROE of 23.4 percent, what is the plowback ratio needed to achieve a sustainable growth rate of 7 percent? (Round to nearest whole number.)

Name: If Merton Corp. has a ROE of 23.4 percent, what is the plowback ratio needed to achieve a sustainable growth rate of 7 percent? (Round to nearest whole number.)
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Quizplus · Accepted Answer

Sustainable growth rate = ROE x plowback ratio
7% = 23.4% x plowback ratio
plowback ratio = 7% / 23.4% = 0.2991 or 30% (rounded to the nearest whole number)