Broslofski Co. maintains a positive retention ratio and keeps its debt-equity ratio constant every year. When sales

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Broslofski Co. maintains a positive retention ratio and keeps its debt-equity ratio constant every year. When sales grow by 20 percent, the firm has a negative projected EFN. What does this tell you about the firm's sustainable growth rate? Do you know, with certainty, if the internal growth rate is greater than or less than 20 percent? Why? What happens to the projected EFN if the retention ratio is increased? What if the retention ratio is decreased? What if the retention ratio is zero?

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Fundamentals of Corporate Finance

ISBN: 978-0077861704

11th edition

Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan

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