Profit margin of green giant = 8% = 0.08
Dividend payout ratio = 67% = 0.67
Total turnover = 1.3 times
Equality multiplier = 1.6 times
First calculate the return of equity = profit margin x turnover x equality
multiplier
Return of Equity = 0.08 x 1.3 x 1.6 = 0.1664
Now the sustainable rate of growth = Return of Equity x (1 - Dividend payout ratio)
Sustainable rate = 0.1664 x (1 - 0.67) = 0.1664 x 0.33 = 0.055
Sustainable rate of growth = 5.5%
