Question: 29. When the net present value is negative, the internal rate of return is. a. equal to the cost of capital b. greater than the

29. When the net present value is negative, the internal rate of return is.

equal to the cost of capital

greater than the cost of capital

less than the cost of capital

greater than or equal to the cost of capital

7. MADA 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 firms sustainable growth rate, 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?

If the retention ratio is increased, the firm will have more internal funding sources available, and it will have to take on more debt to keep the debt/equity ratio constant, so the EFN will decline. Conversely,

if the retention ratio is decreased, the EFN will rise. If the retention rate is zero, both the internal and sustainable growth rates are zero, and the EFN will rise.

if the retention ratio is decreased, the EFN will decline. If the retention rate is zero, both the internal and sustainable growth rates are zero, and the EFN will rise

If the retention ratio is increased, the firm will have less internal funding sources available, and it will have to take on more debt to keep the debt/equity ratio constant, so the EFN will decline. Conversely.

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