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As a firm grows, it must support increases in revenue with new investments in assets. The sustainable, or self-generating, growth model helps a firm assess
As a firm grows, it must support increases in revenue with new investments in assets. The sustainable, or self-generating, 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: Cold Duck Manufacturing Inc. has no debt in its capital structure and has $300 million in assets. Its sales revenues last year were $150 million with a net income of $10 million. The company distributed $1.25 million as dividends to its shareholders last year. What is the firm's sustainable, or self-generating, growth rate? O 3.01% o 3.90% o 0.42% o 1.32% Which of the following are assumptions of the sustainable, or self-generating, growth model? Check all that apply. The firm maintains a constant net profit margin. The firm must issue the same number of new common shares that it issued last year. The firm uses all equity and no debt financing. The firm maintains a constant ratio of assets to equity
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