18.5 a. The equity-to-asset ratio is .8. If the payout ratio were reduced to 25%, the maximum...
Question:
18.5
a. The equity-to-asset ratio is .8. If the payout ratio were reduced to 25%, the maximum growth rate assuming no external financing would be .75 x 18% X.8 = 10.8%.
b. If the firm also can issue enough debt to maintain its equity-to-asset ratio unchanged, the sustainable growth rate will be .75 X 18% = 13.5%.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780073382302
6th Edition
Authors: Richard A Brealey, Stewart C Myers, Alan J Marcus
Question Posted: