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Cambria, Inc., had equity of $126702 at the beginning of the year. At the end of...

Cambria, Inc., had equity of $126702 at the beginning of the year. At the end of the year, the company had total assets of $273357. During the year the company sold no new equity. Net income for the year was $29545 and dividends were $3343.

What is the sustainable growth rate for the company? (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)

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Answer #1
Ans. Sustainable growth rate   =   (ROE * Retention ratio) / [1 - (ROE * Retention ratio)]
(0.1932 * 0.8869) / [1 - (0.1932 * 0.8869)]
0.1713 / [1 - 0.1713]
0.1713 / 0.8287
0.206709304
or   20.6709
ROE   =   Net income / Ending Equity
29545 / 152904
0.1932
*Ending equity = Beginning equity + Net income - Dividends
126702 + 29545 - 3343
152904
*Retention ratio   =   1 - Dividend Payout ratio
1 - 0.1131
0.8869
*Dividend payout ratio =   Dividend / Net income
3343 / 29545
0.1131
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