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14 August, 05:31

The Crash Davis Driving School has an ROE of 13.3 percent and a payout ratio of 32 percent. What is its sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.)

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Answers (1)
  1. 14 August, 09:17
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    9.94% (Approx).

    Explanation:

    Retention ratio=1 - payout ratio

    =1-0.32

    =0.68

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

    = (0.133*0.68) / [1 - (0.133*0.68) ]

    =0.09044/0.90956

    =9.94% (Approx).
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Home » Business » The Crash Davis Driving School has an ROE of 13.3 percent and a payout ratio of 32 percent. What is its sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.)
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