Part 1: Tina and John are attempting to estimate the DFN for Beans Inc. Tina says that if Luke pays a lower dividend, it will increase DFN. Luke says that if Tina has a high profit margin it will decrease DFN. Which of the following is true?

a. Both Tina and Luke are correct

b. Both Tina and Luke are incorrect

c. Tina is correct, and Luke is incorrect

d. Luke is correct, and Tina is incorrect

Part 2: If a company grows at a rate lower than the sustainable growth rate, which of the following must be true?

a. the company will not have any retained earnings.

b. the company is not generating enough addition to retained earnings to pay for increases in assets.

c. spontaneous financing and addition to retained earnings are more than the amount of additional assets needed.

d. the company will not have to increase its assets.

e. both c and d