Determining Sustainable Growth Rate
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A firm has a total asset turnover of 2, a net profit margin of 5%, and a debt ratio of 50%. If the firm has a dividend payout ratio of 20%, calculate its sustainable growth rate.
a. 16%
b. 14%
c. 20%
d. 18%
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Solution Summary
Based on a dividend payout ratio, a firm's sustainable growth rate is calculated.
Solution Preview
Since Asset = Debt+Equity
then Equity/Asset = 1 - Debt/Asset = 1 - 50% = 50%
We ...
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