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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
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: Blue Elk Manufacturing has no debt in its capital structure and has $100 million in assets. Its sales revenues last year were $30 million with a net income of $5 million. The company distributed $1.45 million as dividends to its shareholders last year. What is the firm's self-supporting, growth rate? (Note: Do not round your intermediate calculations.) O 1.47% O 3.68% O 6.51% O 6.89% 1
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