Computation of sustainable growth rate

Reference no: EM1316172

Computation of sustainable growth rate.

The Stieben Company has determined that the following will be true next year;

T = Ratio of total assets to sales = 1

P = Net profit margin on sales = 5%

d = Dividend-payout ratio = 50%

L = Debt-equity ratio = 1

a. What is Stieben's sustainable growth rate in sales?

b. Can Stieben's actual growth rate in sales be different from its sustainable growth rate? Why or why not? How can Stieben change its sustainable growth?

Reference no: EM1316172

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