Respuesta :
Answer:
2.7%.
Step-by-step explanation:.
Given:
Net profit margin ( profitability rate) = 15%
Total sales = $155 million
Total assets = $312 million
Total equity = $223 million.
Dividend rate = 10%
Question asked:
What is the firm's sustainable growth rate ?
First of all we will find these thing.
1. Asset utilization rate = [tex]\frac{Total \ sales}{Total \ assets}[/tex]
= [tex]\frac{155}{312} = 0.496\ million= 0.5\%[/tex]
2. Financial utilization rate = [tex]\frac{Total\ debt}{Total\ equity} \\[/tex]
Total debt = Total asset - Total equity
= $312 million - $223 million = $89 million
= [tex]\frac{89}{223} = 0.4\%[/tex]
3. Return on equity rate = Asset utilization rate [tex]\times[/tex] profitability rate
Return on equity rate = [tex]0.5\times15\times0.4=3\%[/tex]
4. Business retention rate = 100 - Dividend rate
= 100 - 10 = 90%
Now, finally we will calculate sustainable growth rate :
Sustainable growth rate = Return on equity rate [tex]\times[/tex] Business retention rate
= [tex]3\%\times90\%=2.7\%[/tex]
Therefore, firm's sustainable growth rate is 2.7%
