1. A firm expects growth next year to be? 12%. Its sustainable growth rate is? 10%. Which of the following is? true?
A. The firm will need to raise additional debt such that its debt to equity ratio will increase.
B. The firm will have excess cash to increase? dividends, pay back? debt, or repurchase equity.
C. The firm may be able to keep its debt to equity ratio the same by reducing dividends? (assuming they are projected to be high? enough).
D. The firm will need to raise additional capital through a stock issue.
2. Internal growth rate indicates whether a planned investment will increase or decrease firm value.
True
False
3. The sustainable growth rate assumes that the firm will raise no new debt financing.
True
False
4. Internal growth rate assumes that the firm can finance investments via sale of debt.
True
False