A Firm Wishes to Maintain a Growth Rate of 8

question 74

Multiple Choice

A firm wishes to maintain a growth rate of 8 percent and a dividend payout ratio of 62 percent.The ratio of total assets to sales is constant at 1,and the profit margin is 10 percent.What must the debt-equity ratio be if the firm wishes to keep that ratio constant?

• A)0.05
• B)0.40
• C)0.55
• D)0.60
• E)0.95

Distinguish between cash flows and accounting profit in investment appraisal.

Identify and calculate the average investment amount in capital budgeting analysis.

Explain the significance of the hurdle rate and how it is used in investment decisions.

Understand the concepts of capital rationing and post-audit in capital budgeting.

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Definitions:

Complexity

The state or quality of being intricate or complicated, often making tasks or understanding more difficult.

Machine Setup

The process of preparing a machine for a specific task or production run, including assembly, configuration, and calibration to ensure it operates correctly and efficiently.

Quality Inspection

The process of reviewing and testing products to ensure they meet the specified standards and requirements.

Machining

The process of removing material from a workpiece to create a desired shape or finish using various machine tools.