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The Crash Davis Driving School has an ROE of 14.5 percent and a payout ratio of 44 percent. What is its sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Sagot :

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Assuming the Crash Davis Driving School has an ROE of 14.5 percent and a payout ratio of 44 percent. Its sustainable growth rate is:8.84%.

Sustainable growth rate

First step

b=1-payout ratio

b = 1 - .44

b = .56

Second step

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

Sustainable growth rate = [.145(.56)] / [1 - .145(.56)]

Sustainable growth rate=0.0812/(1-0.0812)

Sustainable growth rate=0.0812/0.9188

Sustainable growth rate=0.0884×100

Sustainable growth rate=8.84%

Inconclusion  Its sustainable growth rate is:8.84%.

Learn more about sustainable growth rate here:https://brainly.com/question/14831450

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