Johnson Products earned $4.20 per share last year and paid a $1.55 per share div

Question

Johnson Products earned $4.20 per share last year and paid a $1.55 per share dividend. If ROE was 14 percent, what is the sustainable growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Johnson Products earned $4.20 per share last year and paid a $1.55 per share dividend. If ROE was 14 percent, what is the sustainable growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

Earning per share = 4.20per share

Dividend paid = 1.55 per share

Dividend payout ratio = Dividend payout / Earning per share

= 1.55/4.20

= 0.37

Retention ratio = 1- dividend payout ratio

= 1-0.37

= 0.63

Growth = Retention ratio * Return on equity

= 0.63*0.14

= 8.82 %

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