A Firm with a 30% Total Debt Ratio, Total Assets

question 22

Essay

A firm with a 30% total debt ratio, total assets of $10 million, and an ROE of 14% has been paying out 60% of earnings to shareholders in the form of dividends. Sales are expected to increase by 10% this year, a faster growth rate than usual. Will external funding be required under these conditions? Will the debt-equity ratio remain constant?

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.