Determine a Venture's Sustainable Growth Rate Based on the Following

question 52

Multiple Choice

Determine a venture's sustainable growth rate based on the following information: sales = $1,000,000; net income = $150,000; common equity at the end of last year = $520,000; and dividend payout percentage = 20%.

• A)16%
• B)20%
• C)24%
• D)30%

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Definitions:

Tax-free Transaction

A financial transaction that is not subject to taxes by the governing authority, often used in strategic financial planning.

Net Assets

The total assets of an entity minus its total liabilities, representing the owners' equity in the company.

Goodwill

An intangible asset representing the excess of purchase price over the fair market value of identifiable assets and liabilities in a business acquisition.

Fair Value

The amount one would get from selling an asset or would need to spend to settle a liability in a well-organized sale involving market players on the date of evaluation.