d. Define the term capital intensity. Explain how a decline in capital intensity would affect the AFN, other things held constant. Would economies of scale combined with rapid growth affect capital intensity, other things held constant? Also, explain how changes in each of the following would affect AFN, holding other things constant: the growth rate, the amount of accounts payable, the profit margin, and the payout ratio.

stock will be issued. (3) The interest rate on all debt is 10%. (4) If additional financing is needed, then it will be raised through a line of credit. The line of credit would be tapped on the last day of the year, so it would create no additional interest expenses for that year. (5) Interest expenses for notes payable and LT bonds are based on the average balances during the year. (6) If surplus funds are available, the surplus will be paid out as a special dividend payment. (7) Regular dividends will grow by 15%. (8) Sales will grow by 15%. We call this the Steady scenario because operations remain unchanged.