Answer: 10.0%

**Explanation:** The sustainable growth rate (g) formula is: $$g = ROE \times (1 - \text{Dividend payout ratio})$$ Where: - g = sustainable growth rate = 6% = 0.06 - Dividend payout ratio = 40% = 0.40 - Retention ratio = 1 - Dividend payout ratio = 1 - 0.40 = 0.60 Rearranging the formula to solve for ROE: $$ROE = \frac{g}{(1 - \text{Dividend payout ratio})} = \frac{0.06}{0.60} = 0.10 = 10\%$$ **Verification:** - ROE = 10% - Retention ratio = 60% - Sustainable growth rate = 10% × 60% = 6% Therefore, the correct answer is **B. 10.0%**.

Author: LeetQuiz .