As a firm grows, it must support increases in revenue with new investments in assets. The self$-$supporting, or sustainable, 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 the following case of Cold Duck Manufacturing Inc.:

Cold Duck Manufacturing Inc. has no debt in its capital structure and has $$200,000,000$ in assets. Its sales revenues last year were $$100,000,000$ with a net income of $$2,500,000.$ The company distributed $$135,000$ as dividends to its shareholders last year.

Given the information above, what is Cold Duck Manufacturing Inc.$\text{'}$s sustainable growth rate?

$0\mathrm{.}56\%$

$1\mathrm{.}20\%$

$0\mathrm{.}07\%$

$3\mathrm{.}89\%$

Which of the following are assumptions of the sustainable $($self$-$supporting$)$ growth model? Check all that apply.

The firm maintains a constant net profit margin.

The firm maintains a constant ratio of assets to equity.

The firm uses all equity and no debt financing.

The firm must issue the same number of new common shares that it issued last year.