Given the following information: profit margin = 10%; sales = $100; retention ratio = 40%; assets = $200; equitymultiplier = 2.0. If the firm maintains a constant debt-equity ratio and no new equity is used, what is the maximum sustainable growth rate (SGR)? (Assume a constant profit margin.) I believe the answer is maximum SGR = 4.17% but I request an explanation of the details of the calculation. Hint: In short form, Sustainable growth rate = (ROE x Retention Ratio) / (1- ROE x Retention Ratio)
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