Question: Answer Suppose the CFO does not want to raise external capital (debt or equity) under any circumstance (including when the firm has great investment opportunities

  1. Answer

    1. Suppose the CFO does not want to raise external capital (debt or equity) under any circumstance

      (including when the firm has great investment opportunities but needs external capital to fund them all). What are the firms options? How much can the firm grow (Self-supporting growth rate) if no capital is raised (AFN must equal 0).

    2. Is it possible that after the first pass Total Assets > Total Liabilities + Total Equity? If so, under what situation? What do you do in this situation?

    3. Is it possible for an increase in sales to be accompanied by no increase in fixed assets? If so, under what condition can this occur? Can this be sustained in the long-run?

    4. How would economies of scale and lumpy assets affect financial forecasting?

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