You’ve collected the following information about Sully, Inc.: What is the sustai
ID: 1172625 • Letter: Y
Question
You’ve collected the following information about Sully, Inc.:
What is the sustainable growth rate for the company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Sustainable growth rate %
What is the ROA? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Return on assets %
Explanation / Answer
Profit margin=Net income/Sales
Hence net income=0.0443Sales
Total asset turnover=Sales/Total Assets
Hence Sales=3.4Total assets
Total debt ratio=Total debt/Total assets
Hence Total debt=0.26Total assets
Total assets=debt+equity
Hence equity=(1-0.26)Total assets
=0.74Total assets
ROE=Net income/Total equity
=(0.0443Sales/0.74Total assets)
=(0.0443*3.4Total assets/0.74Total assets)
=0.20354054
Retention ratio=1-payout ratio
=(1-0.28)=0.72
SGR=(ROE*Retention ratio)/[1-(ROE*Retention ratio)]
=(0.20354054*0.72)/[1-(0.20354054*0.72)]
=17.17%(Approx).
ROA=
Net income/Total Assets
=(0.0443Sales/Sales/3.4)
=15.06%(Approx).
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