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Up0
A company with an EPS of $2.75 pays a $1 dividend. If the company maintains a constant dividend yield, and reports ROE of 20% for the next year, what is the company’s sustainable growth rate?
- 7.27%
- 11.20%
- 12.73%
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Up3
Correct Answer: C
The sustainable growth rate is calculated as follows:
Retention Rate = 1 – (1/2.75) =63.64%
Sustainable Growth = .6364*.2 = 12.73%
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Up1
Woo! I got it right. 🙂
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