Has a row of 17 percent and a payout ratio of 25% what is its sustainable growth rate

The **sustainable growth rate (SGR)** can be calculated using the following formula:

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

Where:
- **ROE** is the Return on Equity.
- **Payout Ratio** is the percentage of earnings paid out as dividends.

Given:
- ROE = 17% (or 0.17)
- Payout Ratio = 25% (or 0.25)

Let's calculate the sustainable growth rate.

\[
SGR = 0.17 \times (1 - 0.25) = 0.17 \times 0.75 = 0.1275 \text{ or } 12.75\%
\]

So, the sustainable growth rate is **12.75%**.

Would you like further details on this calculation or have any other questions?

Here are 5 related questions to expand the topic:
1. How does a company's payout ratio impact its growth potential?
2. What happens if the payout ratio increases while ROE remains constant?
3. How does sustainable growth rate differ from actual growth rate?
4. Can a company sustain growth with a payout ratio above 50%?
5. How is ROE calculated and what factors influence it?

**Tip:** The lower the payout ratio, the higher the retention ratio, leading to a higher sustainable growth rate if ROE remains the same.

Discover how to calculate the sustainable growth rate using a Return on Equity (ROE) of 17% and a payout ratio of 25%. This guide explains the sustainable growth rate formula, step-by-step calculations, and the impact of payout ratios on growth potential, suitable for Grades 11-12 and college-level finance students.

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