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As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting growth model helps a firm assess how rapidly
As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting growth model helps a firm assess how rapidly it can grow, while maintaining a balance between its cash outflows (increases in noncash assets) and inflows (funds resulting from increases in liabilities or equity). Consider this case: Green Caterpillar Garden Supplies Inc. has no debt in its capital structure and has $200 million in assets. Its sales revenues last year were $100 million with a net income of $5 million. The company distributed $1.10 million as dividends to its shareholders last year. What is the firm's self-supporting growth rate? 3.15% 0.35% 0.55% 1.99% Which of the following are assumptions of the self-supporting growth model? Check all that apply. The firm will not issue any new common stock next year. The firm pays out a constant proportion of its earnings as dividends The firm's total asset turnover ratio remains constant. The firm uses all equity and no debt financing L
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