Final answer:
The sustainable growth rate of Lakesha's Lounge Furniture Corporation is 14%, calculated by multiplying the ROE of 17.5% with the retention ratio of 80% (1 minus the 20% dividend payout ratio).
Step-by-step explanation:
To calculate the sustainable growth rate, we can use the formula which states that the Sustainable Growth Rate (SGR) is equal to the Return on Equity (ROE) multiplied by the retention ratio (which is 1 minus the dividend payout ratio). So, given Lakesha's Lounge Furniture Corporation had an ROE of 17.5 percent and a dividend payout ratio of 20 percent, we first calculate the retention ratio which is 1 - 0.20 = 0.80 or 80%. We then multiply the retention ratio by the ROE to get the sustainable growth rate: SGR = 17.5% * 0.80 = 14%. Thus, Lakesha's Lounge Furniture Corporation's sustainable growth rate is 14%.