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# Smith's sustainable growth rate in sales

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The Smith Company has determined that the following will be true next year:

T = Ratio of total assets to sales = 1
P = Net profit margin on sales = 5 %
d = Dividend payout ratio = 50 %
L = Debt-equity ratio = 1

a. What is Smith's sustainable growth rate in sales ?
b. Can Smith's actual growth rate in sales be different from its sustainable growth rate.
Why or Why not.

c. How can Smith's change its sustainable growth ?

#### Solution Preview

Sustainable growth rate in sales

The Smith Company has determined that the following will be true next year:

T = Ratio of total assets to sales = 1
P = Net profit margin on sales = 5 %
d = Dividend payout ratio = 50 %
L = Debt-equity ratio = 1

a. What is Smith's sustainable ...

#### Solution Summary

This solution is comprised of a detailed explanation and calculation to calculate Smith's sustainable growth rate in sales.

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