A Firm Wishes to Maintain a Growth Rate of 12

question 14

Multiple Choice

A firm wishes to maintain a growth rate of 12% per year and a dividend payout of 10%. The ratio of total assets to sales is constant at 1.5, and profit margin is 10%. What must be the debt-to-equity ratio?

• A) 0.52
• B) 0.67
• C) 0.79
• D) 0.84

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Definitions:

Nash Model

A concept in game theory where each participant's strategy is optimal given the strategies of all other participants, leading to a situation of equilibrium.

Nash Equilibrium

A concept within game theory where no player can benefit by changing strategies while the other players keep theirs unchanged.

Bertrand Model

An economic model of competition among firms that compete by setting prices simultaneously.

Payoff Matrix

A table that shows the payoffs for each player in a game for every possible combination of actions by the players.