The Explicit Forecast Period Must Be Long Enough for the Company

question 18

Multiple Choice

The explicit forecast period must be long enough for the company to reach a steady state.Which of the following is NOT a desirable property of that steady state?

• A)The growth rate rises above the required return on capital.
• B)The company earns a constant rate of return on existing capital.
• C)The company earns a constant rate of return on new capital invested.
• D)The company reinvests a constant proportion of its operating profits into the business each year.

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Definitions:

Manufacturing Budget

A detailed financial plan that estimates the costs of production for a given period including direct materials, labor, and overhead.