Ultimate access to all questions.
Answer-first summary for fast verification
Answer: 6.2%
## Explanation The sustainable growth rate (SGR) is calculated using the formula: **SGR = ROE × (1 - Dividend Payout Ratio)** Where: - **ROE = ROA × Leverage Ratio** First, calculate ROE: ROE = 8% × 1.2 = 9.6% Then calculate SGR: SGR = 9.6% × (1 - 0.35) SGR = 9.6% × 0.65 SGR = 6.24% Rounded to one decimal place, this is approximately **6.2%**. **Step-by-step calculation:** 1. ROA = 8% 2. Leverage Ratio = 1.2 3. ROE = 8% × 1.2 = 9.6% 4. Dividend Payout Ratio = 35% = 0.35 5. Retention Ratio = 1 - 0.35 = 0.65 6. SGR = 9.6% × 0.65 = 6.24% ≈ 6.2% Therefore, the correct answer is **C. 6.2%**.
Author: LeetQuiz .
An analyst gathers the following information about a company:
| ROA | 8% |
|---|---|
| Leverage ratio | 1.2 |
| Dividend payout ratio | 35% |
The sustainable growth rate is closest to:
A
3.4%
B
5.2%
C
6.2%
No comments yet.