Question

# The Crash Davis Driving School has an ROE of 16.9 percent and a payout ratio of...

The Crash Davis Driving School has an ROE of 16.9 percent and a payout ratio of 68 percent.

What is its sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Sustainable growth rate             %

Sustainable Growth Rate

Sustainable Growth Rate is calculated by using the following formula

Sustainable Growth Rate = [ROE x b)] / [1- (ROE x b)]

ROE = 16.90%

Retention Ratio (b) = 0.32 (1 – 0.68)

Therefore, the Sustainable Growth Rate = [ROE x b)] / [1- (ROE x b)]

= [0.1690 x 0.32] / [1 – (0.1690 x 0.32)]

= 0.05408 / [1 - 0.05408]

= 0.05408 / 0.94592

= 0.0572

= 5.72%

“Hence, the Sustainable Growth Rate = 5.72%”

#### Earn Coins

Coins can be redeemed for fabulous gifts.

Similar Homework Help Questions
• ### The Crash Davis Driving School has an ROE of 16.3 percent and a payout ratio of...

The Crash Davis Driving School has an ROE of 16.3 percent and a payout ratio of 62 percent. What is its sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Sustainable growth rate %

• ### If the Crash Davis Driving School has an ROE of 14.6 percent and a payout ratio...

If the Crash Davis Driving School has an ROE of 14.6 percent and a payout ratio of 20 percent, what is its sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Sustainable growth rate% _____

• ### If the Crash Davis Driving School has an ROE of 14.5 percent and a payout ratio...

If the Crash Davis Driving School has an ROE of 14.5 percent and a payout ratio of 30 percent. Required: What is its sustainable growth rate?

• ### The Wintergrass Company has an ROE of 15.1 percent and a payout ratio of 40 percent....

The Wintergrass Company has an ROE of 15.1 percent and a payout ratio of 40 percent.    What is the company’s sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)   Sustainable growth rate   %

• ### The Wintergrass Company has an ROE of 15.1 percent and a payout ratio of 40 percent....

The Wintergrass Company has an ROE of 15.1 percent and a payout ratio of 40 percent.    What is the company’s sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)   Sustainable growth rate

• ### Question If the Hunter Corp. has an ROE of 18 and a payout ratio of 26...

Question If the Hunter Corp. has an ROE of 18 and a payout ratio of 26 percent, what is its sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Answer-  Sustainable growth rate % ______________ Question If Wilkinson, Inc., has an equity multiplier of 1.47, total asset turnover of 1.6, and a profit margin of 5.7 percent, what is its ROE? (Do not round intermediate calculations and enter...

• ### The Wintergrass Company has an ROE of 15 percent and a payout ratio of 40 percent....

The Wintergrass Company has an ROE of 15 percent and a payout ratio of 40 percent. What is the company’s sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

• ### Gold Corp has an ROE of 15 percent and a payout ratio of 18 percent at...

Gold Corp has an ROE of 15 percent and a payout ratio of 18 percent at is its sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g 32.16 tainabte growth rate

• ### Problem 4-13 Sustainable Growth (LO3] Synyster Corp. has an ROE of 16 percent and a payout...

Problem 4-13 Sustainable Growth (LO3] Synyster Corp. has an ROE of 16 percent and a payout ratio of 24 percent. What is its sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Sustainable growth rate

• ### If Levine, Inc., has an ROA of 7.8 percent and a payout ratio of 25 percent,...

If Levine, Inc., has an ROA of 7.8 percent and a payout ratio of 25 percent, what is its internal growth rate?  (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Internal growth rate %