P4-7 Calculating Sustainable Growth [LO3]

The most recent financial statements for Live Co. are shown here:

Income Statement		Balance Sheet
Sales	$18,000	Current assets	$38,814	Debt	$38,254
Costs	10,800	Fixed assets	27,160	Equity	27,720
Taxable income	$7,200	Total	$65,974	Total	$65,974
Taxes (34%)	2,448
Net income	$4,752

Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 20 percent dividend payout ratio. No external equity financing is possible.

Required:

What is the sustainable growth rate? (Do not round your intermediate calculations.)

16.39 %

15.39 %

3.55 %

15.89 %

6.11 %

References