Sustainable Growth Rate Last year Umbrellas Unlimited Corporation had an ROE of 16.5% and a dividend payout ratio of 40%. What is the sustainable growth rate?

Question

Quizplus · Accepted Answer

Sustainable Growth Rate = ROE x (1 - dividend payout ratio)
= 16.5% x (1- 0.4)
= 9.9%
Therefore, the sustainable growth rate is 9.9% or 10.99% rounded to the nearest hundredth. Choice B is the correct answer.

Sustainable Growth Rate Last Year Umbrellas Unlimited Corporation Had an ROE