3. The internal growth rate of a firm is best described asthe:

Minimum growth rate achievableassuming a 100 percent retention ratio.

Minimum growth rate achievableif the firm maintains a constant equity multiplier.

Maximum growth rate achievableexcluding external financing of any kind.

Maximum growth rate achievableexcluding any external equity financing while maintaining aconstant debt-equity ratio.

Maximum growth rate achievable with unlimited debtfinancing.

4. Martin Aerospace is currently operating at full capacitybased on its current level of assets. Sales are expected toincrease by 4.5 percent next year, which is the firm's internalrate of growth. Net working capital and operating costs areexpected to increase directly with sales. The interest expense willremain constant at its current level. The tax rate and the dividendpayout ratio will be held constant. Current and projected netincome is positive. Which one of the following statements iscorrect regarding the pro forma statement for next year?

The pro forma profit margin isequal to the current profit margin.

Retained earnings will increaseat the same rate as sales.

Total assets will increase atthe same rate as sales.

Long-term debt will increase indirect relation to sales.

Owners' equity will remainconstant.