External Financing Needed: Sterling Resorts Has Total Assets Worth $13,442,975

question 75

Multiple Choice

External financing needed: Sterling Resorts has total assets worth $13,442,975. It is expecting to grow its revenue at a rate of 25 per cent next year. For next year they expect a profit of $3,475,321 and will pay out 45 per cent as dividends. What is the external financing needed by this company to meet its growth expectations?

• A) $1,796,849.30
• B) $1,449,317.20
• C) No external funding is needed.
• D) None of the above

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Definitions:

Correlation

A statistical measure that indicates the extent to which two or more variables fluctuate together. A positive correlation indicates that variables move in the same direction, while a negative correlation indicates they move in opposite directions.

Risk-Free Rate

The hypothesized return on an investment that carries no risk, often linked with government bonds.

Minimum Required Return

The lowest acceptable return on an investment, considering the risk and the cost of capital.

Expected Return

The anticipated return on an investment, taking into account the probabilities of each potential outcome.