Question

You are given the following information on Kaleb's Kickboxing:

Profit margin 7%

Capital intensity ratio 0.7

Debt–equity ratio 0.8

Net income $80061

Dividends $16694

Calculate the sustainable growth rate (in %) (round 4 decimal places)

Answer #1

We first must calculate the ROE to calculate the sustainable growth rate. To do this we must realize two other relationships. The total asset turnover is the inverse of the capital intensity ratio, and the equity multiplier is 1 + D/E. Using these relationships, we get:

ROE = (PM)(TAT)(EM)

ROE = (0.07)(1/0.7)(1 + 0.80)

ROE = 0.18 or 18%

The plowback ratio is one minus the dividend payout ratio, so:

b = 1 – ($16,694 / $80,061)

b = 0.7915

Now we can use the sustainable growth rate equation to get:

Sustainable growth rate = (ROE × b) / [1 – (ROE × b)]

Sustainable growth rate = [0.18(0.7915)] / [1 – 0.18(0.7915)]

Sustainable growth rate = 0.1661 or 16.61%

You are given the following information on Kaleb's
Kickboxing:
Profit margin 9%
Capital intensity ratio 0.7
Debt–equity ratio 0.7
Net income $97767
Dividends $16405
Calculate the sustainable growth rate (in %).
(Enter your answer as a percentage, omit the "%" sign in
your response, and round your answer to 4 decimal places. For
example, 1.23456% should be entered as 1.2346)

Consider the following
information for Kaleb's Kickboxing:
Profit margin
9.9%
Capital intensity
ratio
0.55
Debt–equity
ratio
0.58
Net income
$29,000
Dividends
$20,300
Required:
Calculate the sustainable growth
rate?

Consider the following
information for Kaleb's Kickboxing:
Profit margin
8%
Capital intensity
ratio
0.59
Debt–equity
ratio
0.59
Net income
$23,000
Dividends
$15,640
Required:
Calculate the sustainable growth
rate? (Do not round your intermediate
calculations.)

You are given the following information on Kaleb's Heavy
Equipment:
Profit margin
5.1
%
Capital intensity ratio
.60
Debt-equity ratio
.6
Net income
$
50,000
Dividends
$
13,200
Calculate the sustainable growth rate. (Do not round
intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)

You are given the following information on Kaleb's Welding
Supply:
Profit margin 6.7 %
Capital intensity ratio .76
Debt–equity ratio .9
Net income $ 82,000
Dividends $ 16,400
Calculate the sustainable growth rate.

ou are given the following information on Kaleb’s Heavy
Equipment: Profit margin 7.3 % Capital intensity ratio .80
Debt-equity ratio .95 Net income $ 73,000 Dividends $ 24,000
Calculate the sustainable growth rate. (Do not round intermediate
calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.)

Profit margin
=
10.3
%
Capital intensity ratio
=
.64
Debt−equity ratio
=
.79
Net income
=
$
114,000
Dividends
=
$
53,500
Based on the above information, calculate the sustainable growth
rate for Southern Lights Co. (Do not round intermediate
calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.)
Sustainable growth rate
%

You are given the following information for Clapton Guitars,
Inc.
Profit margin
9%
Total asset turnover
1.3
Total debt ratio
0.3
Payout ratio
37%
Calculate the sustainable growth rate (in %) (round 4 decimal
places)

You are given the following information for Clapton Guitars,
Inc.
Profit margin 10% Total asset
turnover 1.4 Total debt ratio
0.49 Payout ratio 36%
Calculate the sustainable growth rate (in %). (round 4 decimal
places)

You are given the following information for Clapton Guitars,
Inc.
Profit margin
9
%
Total asset turnover
1.6
Total debt ratio
0.42
Payout ratio
35
%
Calculate the sustainable growth rate (in %).
(Enter your answer as a percentage, omit the "%" sign in
your response, and round your answer to 4 decimal places. For
example, 1.23456% should be entered as 1.2346)

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 14 minutes ago

asked 29 minutes ago

asked 39 minutes ago

asked 52 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago