Country Comfort, Inc. has equity of $168,500, total assets of $195,000, net income of $63,000, and dividends of $37,800. What is the sustainable growth rate?

Question

Cason Hammond

Business

22 May, 08:37

Country Comfort, Inc. has equity of $168,500, total assets of $195,000, net income of $63,000, and dividends of $37,800. What is the sustainable growth rate?

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Answers (1)

Know the Answer?

Clara Welch · Answer 1

The answer is 15%

Explanation:

sustainable growth rate = Retention Rate * Return on Equity

sustainable growth rate = 0.4 * 0.3738=0.14955 * 100 = 15%

Retention Rate = [ (Net Income - Dividends) / Net Income) ]

Retention Rate = ($63,000-$37,800) / $63,000 = 0.4

Return on Equity = (Net Income / Total Shareholder's Equity)

Return on Equity = ($63,000/$168,500) = 0.3739