Question

The Cornelius Company has an ROE of 14.4 percent and a payout ratio of 30 percent. What is the company’s sustainable growth rate?

Answer 1

11.21%

Step-by-step explanation:

Calculation for What is the company’s sustainable growth rate

Sustainable growth rate=ROE*b/1-ROE*b

Let plug in the formula

Sustainable growth rate=14.4%*(100%-30%)/1-=14.4%*(100%-30%)

Sustainable growth rate=14.4%*70%/1-14.4%*70%

Sustainable growth rate=0.1008/0.8992

Sustainable growth rate=0.11209*100

Sustainable growth rate=11.21% approximately

Therefore the Sustainable growth rate will be 11.21%