What Amount of Debt Should a Firm Include in Its

question 10

Multiple Choice

What amount of debt should a firm include in its financing mix in order to achieve a sustainable growth rate of 9% while maintaining a 40% dividend payout, a 10% profit margin, and an asset turnover of 1.5?

• A)66.67% debt
• B)60.00% debt
• C)50.00% debt
• D)Zero debt Sustainable growth rate = plowback ratio x ROE
• )09 = .6 x

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Definitions:

Absolute Threshold

The minimum intensity at which a stimulus can be detected by an individual 50% of the time.

Weber's Law

A principle stating that the just-noticeable difference between two stimuli is proportional to the magnitude of the stimuli.

Absolute Threshold

The minimum intensity of stimulation that must occur before you experience a sensation.

Auditory Convergence

The process by which signals from both ears are combined and processed in the brain to enhance sound localization and understanding.