Westcomb Inc had equity of 150000 at the beginning of the ye

Westcomb, Inc. had equity of $150,000 at the beginning of the year. At the end of the year, the company had total assets of $195,000. During the year, the company sold no new equity. Net income for the year was $72,000 and dividends were $44,640. What is the sustainable growth rate?

15.32 percent

15.79 percent

17.78 percent

18.01 percent

18.24 percent

Solution

The correct answer would be 18.24 percent

change in equity = Retained earnings = income - dividends

= $72,000-$ 44,640

= $27,360

sustainable growth = change in equity / no of equity at begnning * 100

= $27,360/150,000 * 100

= 18.24 percent