The most recent financial statements for Shinoda Manufacturing Co. are shown bel
ID: 2651214 • Letter: T
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%