A firm's board of directors has voted to support the CEO's desire for an expansion plan....

 

Transcribed Image Text:

A firm's board of directors has voted to support the CEO's desire for an expansion plan. This expansion is expected to increase future annual revenues by 16%. Assuming the following financial values for the most recent fiscal year, will the firm be able to internally finance this growth? Net profit margin = 3.05% . Assets $25,000,000 Revenues $50,000,000 Debt = $15,000,000 . Equity = $10,000,000 . The firm does not pay dividends No, because the sustainable growth rate (SGR) is 14% Yes, because the SGR is 14% No, because the SGR is 18% Yes, because the SGR is 18% A firm's board of directors has voted to support the CEO's desire for an expansion plan. This expansion is expected to increase future annual revenues by 16%. Assuming the following financial values for the most recent fiscal year, will the firm be able to internally finance this growth? Net profit margin = 3.05% . Assets $25,000,000 Revenues $50,000,000 Debt = $15,000,000 . Equity = $10,000,000 . The firm does not pay dividends No, because the sustainable growth rate (SGR) is 14% Yes, because the SGR is 14% No, because the SGR is 18% Yes, because the SGR is 18%

Answer rating: 100% (QA)

The question asks if the firm can internally finance its 16 revenue growth target based on its susta... View the full answer