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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This solution illustrates how to compute the sustainable growth rate.
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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 ...
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