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%.