The most recent financial statements for Bello Co. are shown here: Income Statem
ID: 2821768 • Letter: T
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).