Question

Wilt's has earnings per share of $2.98 and dividends per share of $0.35. What is the firm's sustainable rate of growth if its return on assets is 14.6% and its return on equity is 18.2%?

Answer 1

16.06%

Explanation:

According to the given situation the computation of sustainable rate of growth is shown below:-

Sustainable Growth Rate = Return on equity × (1 - Dividend payout ratio)

= 18.2% × ( 1 - 0.35 ÷ 2.98)

= 18.2% × ( 1 - 0.1174)

= 16.06%

Therefore for computing the sustainable rate of growth we simply applied the above formula.