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High Flyer, Inc., wishes to maintain a growth rate of 10 percent per year with a fixed debt-equity ratio of 0.4. The profit margin is
High Flyer, Inc., wishes to maintain a growth rate of 10 percent per year with a fixed debt-equity ratio of 0.4. The profit margin is 5 percent, and total asset turnover is constant at 1. Is this growth rate possible? To answer, determine what the retention ratio must be. How do you interpret the result? *Hint* Start by using the DuPont identity.
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