The most recent financial statements for Bello Co. are shown here: Income Statem

Question

The most recent financial statements for Bello Co. are shown here: Income Statement Sales Costs Taxable Balance Sheet $20,400 Current $12,000 Debt $16,600 14,000 Fixed assets 32,850 Equity 28,250 assets income s6,400 Total 44850 Total $44,850 Taxes (22%) 1.408 Net income 4,992 Assets and costs are proportional to sales. Debt and equity are not maintains a constant 35 percent dividend payout ratio . The company What is the sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Sustainable growth rate 1%

Explanation / Answer

ROE=Net income/equity

=4992/28250

=0.176707964

Retention ratio=1-dividend ratio

=(1-0.35)=0.65

Sustainable growth rate=(ROE*Retention ratio)/[1-(ROE*Retention ratio)]

=(0.176707964*0.65)/[1-(0.176707964*0.65)]

which is equal to

=12.98%(Approx).

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