Question
If the firm grows at its internal growth rate, increasing assets only with its retained earnings, how will this likely affect its WACC? If the
If the firm grows at its internal growth rate, increasing assets only with its retained earnings, how will this likely affect its WACC? If the firm grows at its sustainable growth rate with increase in both its retained earnings and debt, maintaining constant debt ratio, how will this affect its WACC? If the firm attempts to grow faster than its sustainable growth rate with modest increases in its debt ratio, how will this likely affect its WACC? What about very large increases in its debt ratio? Explain.
I am trying to get a basic understanding for this question as I am unsure how to respond using the WACC, internal growth rate and sustainable growth rate.
Wacc=7.71%
Internal growth= 7.75%
Sustainable growth= 25.53%
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