Which One of the Following Will Increase the Sustainable Rate

question 14

Multiple Choice

Which one of the following will increase the sustainable rate of growth a corporation can achieve?

• A) avoidance of external equity financing
• B) increase in corporate tax rates
• C) reduction in the retention ratio
• D) decrease in the dividend payout ratio
• E) decrease in sales given a positive profit margin
• F) None of the above.

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Definitions:

Initial Cost

Initial cost is the total expense incurred to acquire an asset or start a project, including purchase price and all related fees.

Net Present Value (NPV)

A financial metric that calculates the difference between the present value of cash inflows and the present value of cash outflows over a period of time, used to assess the profitability of investments.

Internal Rate of Return (IRR)

A financial metric used to evaluate the profitability of investments, representing the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Cost of Capital

The rate of return that a company must pay to its capital providers, including both equity and debt holders, for using their capital in the business.