The most recent financial statements for Shinoda Manufacturing Co. are shown bel

Question

The most recent financial statements for Shinoda Manufacturing Co. are shown below:

Income Statement

Balance Sheet

  Sales

$

75,300

  Current assets

$

27,000

  Debt

$

37,200

  Costs

55,380

  Fixed assets

89,300

  Equity

79,100

  Taxable income

$

19,920

     Total

$

116,300

     Total

$

116,300

  Tax (35%)

6,972

  Net Income

$

12,948

Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 40 percent dividend payout ratio. No external financing is possible.

Required:

What is the sustainable growth rate? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

  Sustainable growth rate

%

The most recent financial statements for Shinoda Manufacturing Co. are shown below:

Explanation / Answer

Sustainable Growth rate= Return on Equity (1- dividend payout ratio)

Return on Equity= Net Income/ Equity = 12948/79100=16.36

Sustainable Growth Rate= 16.36(1-.4) = 9.82

Sustainable Growth Rate= 9.82%

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