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Answered

SGS Corp. has an ROE of 14 percent and a payout ratio of 22 percent. What is its sustainable growth rate?

Answer :

Manethogo Manethogo

Answer:

14.05%

Explanation:

Return on equity ROE =14%

payout ratio = 22%

Now, retention ratio b = 100-payout ratio= 100-22=88%

=0.88

Now sustainable growth rate = (ROE×b)/(1-(ROE*b)

= (0.14*0.88)/(1-0.14*0.88) =0.1405

=14.05%

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