Question

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)**

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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