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6) Under which one of the following capital structures will a firm's internal growth rate exceed its sustainable growth rate? A) Total debt-to-asset ratio equals

6) Under which one of the following capital structures will a firm's internal growth rate exceed its sustainable growth rate?

A) Total debt-to-asset ratio equals 35%.

B) Equity-to-debt ratio equals 125%.

C) Equity-to-debt ratio equals 60%. D) None of the options.

The correct answer is D. Please explain what capital structures would a firm's internal growth rate exceed its sustainable growth rate? Provide examples, equations, and explanation why the A-C are incorrect.

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