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You’ve collected the following information about Gandalf, Inc.Sales $320,000 Net income $18,500Dividends $7,300Total debt $68,000Total equity $99,000 A. What is the sustainable growth rate for the company? B. Assuming it grows at this rate, how much new borrowing will take place in the coming year, assuming a constant debt-equity ratio? C. What growth rate could be supported with no outside financing at all?

Respuesta :

jepessoa

Answer:

11.31%

Explanation:

sustainable growth rate = retention rate x return on equity

return on equity (ROE) = net income / shareholders' equity = $18,500 / $99,000 = 18.69%

retention rate = 1 - dividend payout ratio

dividend payout ratio = dividends / net income = $7,300 / $18,500 = 39.46%

retention rate = 1 - 39.46% = 60.54%

sustainable growth rate = 0.6054 x 0.1869 = 0.1131 = 11.31%

ayokenny2001

The sustainable growth rate for the company is : 11.31%

Sustainable growth rate is computed as :

= Retention rate x return on equity

Return on equity (ROE)

= Net income / shareholders' equity = $18,500 / $99,000 = 18.69%

Retention rate

= 1 - dividend payout ratio

Dividend payout ratio

= dividends / net income

= $7,300 / $18,500

= 39.46%

Retention rate

= 1 - 39.46%

= 60.54%

Sustainable growth rate

= 0.6054 x 0.1869

= 0.1131

= 11.31%

Learn more about sustainable growth rate here : https://brainly.com/question/23455512

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