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    Sustainable Growth Rate

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    Assuming the following ratios are constant, what is the sustainable growth rate?

    Total Assets/sales 1.0
    Net income/sales .1
    Debt/equity .3
    Dividends/net income .4

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    Solution Preview

    The sustainable growth rate is defined as:

    Sustainable growth rate = Return on equity * (1-payout ratio)
    Sustainable growth rate = (net income/equity) * (1- payout ratio)
    Sustainable ...

    Solution Summary

    This solution illustrates how to compute the sustainable growth rate.