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[Step-by-Step] Quesada Corporation reported net income of $4 million on sales of $100 million. It retained 50% of net income. A summary of Quesada's ending

Question: Quesada Corporation reported net income of $4 million on sales of $100 million. It retained 50% of net income. A summary of Quesada's ending balance sheet (in millions) is shown below:

Current Assets $20 Current Liabilities $10

Long-Term Liabilities 20

Fixed Assets 40 Equity 30

Total $60 Total $60

The firm's beginning equity was $28.

Quesada Corporation (Problem 13) is willing to cut its dividend in order to achieve a sustainable growth rate of 12%. What payout ratio is necessary to achieve that growth rate, given the information in Problem 13?

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