2. 28.

EFN and sustainable growth [LO 4.2, 4.3] Redo Problem 26 using sales growth rates of 30 and 35 per cent in addition to 20 per cent.

Assume the firm wishes to maintain its debt-to-equity ratio. Tabulate the relationship between EFN and the growth rate and use this table to describe the relationship between them. At what growth rate is the EFN equal to zero? Why is this sustainable growth rate different from that found by using the equation in the text?