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The green giant has a 5% profit margin and a 40% dividend payout ratio. the total asset turnover is 1.40 and the equity multiplier is 1.50. what is the sustainable rate of growth?

Respuesta :

W0lf93
Sustainable Growth Rate is = ( 1- Dividend Payout Ratio ) X RoE Now, We have to find out the RoE of the given problem. Return on Equity (RoE) = (Net Profit Margin) X (Asset Turnover) X(Equity Multiplier). = (0.05) X (1.40) X (1.50) =0.105 or 10.5% Now Sustainable Growth Rate(SGR) = (1- .40) X 0.105 = .063 or 6.3% So, According to the question SGR of Green Giant is = 6.3%

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