Profit margin=5.9%. Capital intensity ratio = .68.     Debt equity ratio=.7.      Net income = $66,000.   Dividends = $14,800

Calculate the sustainable growth rate 

To calculate the sustainable growth rate (SGR), we can use the following formula:

\[
\text{SGR} = \dfrac{ROE \times (1 - \text{Dividend Payout Ratio})}{1 - (ROE \times (1 - \text{Dividend Payout Ratio}))}
\]

### Step 1: Calculate Return on Equity (ROE)

\[
\text{ROE} = \dfrac{\text{Net Income}}{\text{Equity}}
\]

We do not have the equity directly, but we can use the Debt-to-Equity ratio (D/E) to determine it. The formula for Debt-to-Equity ratio is:

\[
\text{D/E} = \dfrac{\text{Debt}}{\text{Equity}}
\]

Let’s assume that we can derive the equity from this relation using the Capital Intensity Ratio, but for now, I’ll first handle what can be calculated clearly.

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Let’s compute the Sustainable Growth Rate

Profit margin=5.9%. Capital intensity ratio = .68. Debt equity ratio=.7. Net income = $66,000. Dividends = $14,800. Calculate the sustainable growth rate.

Discover how to calculate the sustainable growth rate using financial ratios. In this example, with a profit margin of 5.9%, a capital intensity ratio of 0.68, a debt-equity ratio of 0.7, net income of $66,000, and dividends of $14,800, we apply key financial formulas including ROE and the dividend payout ratio. Suitable for finance and economics students.

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