computingSustainableG: Calculates Sustainable Growth Rate.

In stockAnalyst: Equity Valuation using Methods of Fundamental Analysis

Calculates Sustainable Growth Rate.

Description

Sustainable growth rate as the rate of dividend (and earnings) growth that can be sustained for a given level of return on equity, assuming that the capital structure is constant through time and that additional common stock is not issued. The reason for studying this concept is that it can help in estimating the stable growth rate in a Gordon growth model valuation.Sustainable growth rate(g) is equal to earnings retention rate , represented by b (that is equal to 1 minus dividend payout ratio) multiplied with return on equity (Jerald E. Pinto, 2020).

Usage

computingSustainableG(retentionRate, ROE)

Arguments

retentionRate	A number.
ROE	A number.

Details

According to information provided in Jerald E. Pinto (2020), the method computingSustainableG is developed for computing Sustainable Growth Rate for the values passed to its two arguments.Here, retentionRate is retention rate (that is equal to 1 minus dividend payout ratio), and ROE is return on equity.

Value

Input values to two arguments retentionRate and ROE.

Author(s)

MaheshP Kumar, [e-mail]

References

Pinto, J. E. (2020). Equity Asset Valuation (4th ed.). Wiley Professional Development (P&T). https://bookshelf.vitalsource.com/books/9781119628194

Examples

computingSustainableG(retentionRate=0.60,ROE=0.25)

stockAnalyst documentation built on Sept. 13, 2022, 5:07 p.m.