If a Firm Bases Its Growth Projection on the Rate

question 77

Multiple Choice

If a firm bases its growth projection on the rate of sustainable growth,shows positive net income,and has a dividend payout ratio of 30 percent,then the:

• A)fixed assets will have to increase at the sustainable growth rate,even if the firm is currently operating at only 78 percent of capacity.
• B)number of common shares outstanding will increase at the same rate of growth.
• C)debt-equity ratio will have to increase.
• D)debt-equity ratio will remain constant while retained earnings increase.
• E)fixed assets,the debt-equity ratio,and number of common shares outstanding will all increase.

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