Anaconda Inc. has decided against borrowing and to have all its assets financed by equity. Further, it intends to keep its payout ratio at 40%. Its asset turnover ratio is 0.9, its profit margin is 8% and its profits are taxed at 40%. The firms target growth rate is 5%.

Please note: For A) and B) it is important that you show your calculations

A) Is the target growth rate consistent with firms financing policy?

B) If not, how much does it need to increase the asset turnover ratio or profit margin to meet the target growth rate?

C) Explain what happens if Anaconda Inc. cannot close the gap between its sustainable growth rate and target growth rate.