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?

Question

Vaughn Marquez

Business

5 December, 02:02

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?

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Octavio Mann · Answer 1

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%