Last year Lakesha’s Lounge Furniture Corporation had an ROE of 19.4 percent and a dividend payout ratio of 30 percent.

What is the sustainable growth rate?

Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

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

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

Where:
- ROE is the Return on Equity (19.4% or 0.194),
- Dividend Payout Ratio is 30% or 0.30.

Now we can plug the values into the formula:

\[
\text{SGR} = 0.194 \times (1 - 0.30)
\]

\[
\text{SGR} = 0.194 \times 0.70
\]

Now, I'll calculate the result.The sustainable growth rate for Lakesha’s Lounge Furniture Corporation is **13.58%**.

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

Here are five related questions you might consider:
1. How does ROE affect the sustainable growth rate over time?
2. What impact does increasing the dividend payout ratio have on the sustainable growth rate?
3. Can a company have a sustainable growth rate higher than its ROE?
4. What role does retained earnings play in achieving a high sustainable growth rate?
5. How does the sustainable growth rate relate to the company’s long-term financial strategy?

**Tip**: Companies with high sustainable growth rates generally reinvest more earnings rather than paying them out as dividends.

Last year Lakesha’s Lounge Furniture Corporation had an ROE of 19.4 percent and a dividend payout ratio of 30 percent. What is the sustainable growth rate? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

Learn how to calculate the sustainable growth rate (SGR) for Lakesha’s Lounge Furniture Corporation using its Return on Equity (ROE) of 19.4% and a dividend payout ratio of 30%. This step-by-step guide demonstrates how to use the formula SGR = ROE × (1 - Dividend Payout Ratio) to arrive at the SGR of 13.58%. Suitable for finance and business students.

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