1. A firm has an internal growth rate of 8.5%, a sustainable growth rate of 12%, and the firm’s expected annual sales growth rate per year for the next five years is 10%. Which one of the following statements is true?
2. a.
3. The firm should plan on having to use external financing each year over the next five years.
4. b.
5. The firm should plan on seeing its debt-to-equity ratio rise unless it issues new equity.
6. c.
7. The firm can expect to have zero external financing needs over the next five years.
8. d.
9. The firm should be able to reduce its existing debts over the next five years.

Answer rating: 100% (QA)

The detailed answer for the above question is provided below b The firm should plan on seeing it... View the full answer