Question

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)

Answer #1

First we will calculate the Return on assets (ROA) as per below:

**Return on assets (ROA) = Profit margin * Total asset
turnover**

Putting the values in the above formula, we get,

Return on assets (ROA) = 9% * 1.3 = 11.7%

Now,

When total debt ratio (Debt / Total assets) is 0.3, so equity to total assets or equity ratio will be 0.7 (because if 30% of assets are financed by debt, then remaining 70% will be financed by equity).

Next, we will calculate Return on equity (ROE):

**Return on equity (ROE) = Return on assets / Equity
ratio**

Return on equity (ROE) = 11.7% / 0.7 =16.7142857143

Now, we will calculate sustainable growth rate as per below:

**Sustainable growth rate = Return on equity * (1 - payout
ratio)**

Sustainable growth rate = 16.7142857143% * (1 - 0.37)

Sustainable growth rate = 16.7142857143% * 0.63 =10.53%

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)

You are given the following information for Hendrix Guitars,
Inc.
Profit margin
6.7
%
Total asset
turnover
1.7
Total debt
ratio
.48
Payout ratio
25
%
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’ve collected the following information about Sully,
Inc.:
Profit margin
=
4.43
%
Total asset turnover
=
3.40
Total debt ratio
=
.26
Payout ratio
=
28
%
What is the sustainable growth rate for the company? (Do
not round intermediate calculations and enter your answer as a
percent rounded to 2 decimal places, e.g., 32.16.)
Sustainable growth rate
%
What is the ROA? (Do not round intermediate calculations
and enter your answer as a percent rounded to...

Assume the following ratios are constant. Total asset turnover =
2.30 Profit margin = 5.8 % Equity multiplier = 1.77 Payout ratio =
35 % What is 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.) Sustainable growth
rate

Assume the following ratios are constant.
Total asset turnover
=
2.23
Profit margin
=
5.1
%
Equity multiplier
=
1.70
Payout ratio
=
48
%
What is 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.)
Sustainable growth rate ________ %

Assume the following ratios are constant:
Total asset turnover
2.50
Profit margin
5.4
%
Equity multiplier
1.30
Payout ratio
35
%
What is 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.)

Assume the following ratios are constant. Total asset turnover =
2.24 Profit margin = 5.2 % Equity multiplier = 1.71 Payout ratio =
49 % What is the sustainable growth rate?

Assume the following ratios are constant: Total asset turnover 2
Profit margin 5.1 % Equity multiplier 1.2 Payout ratio 25 % What is
the sustainable growth rate?

Assume the following ratios are constant.
Total asset turnover 1.43
Profit margin 9.1%
Equity multiplier 1.8
Payout ratio 67%
What is the sustainable growth rate?

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