Suppose that assets and costs maintain a constant ratio to sales. The firm retains 30% of earnings. If the firm is producing at full capacity, what is the maximum growth rate (assuming no equity sales) that will maintain a constant debt-equity ratio?
A) 5.2%
B) 15.6%
C) 18.8%
D) 21.0%
E) 29.2%

Question

Suppose that assets and costs maintain a constant ratio to sales. The firm retains 30% of earnings. If the firm is producing at full capacity, what is the maximum growth rate (assuming no equity sales) that will maintain a constant debt-equity ratio?
A) 5.2% 
B) 15.6% 
C) 18.8% 
D) 21.0% 
E) 29.2%

Quizplus · Accepted Answer

The Answer of   Suppose that assets and costs maintain a constant ratio to sales. The firm retains 30% of earnings. If the firm is producing at full capacity, what is the maximum growth rate (assuming no equity sales) that will maintain a constant debt-equity ratio?
A) 5.2% 
B) 15.6% 
C) 18.8% 
D) 21.0% 
E) 29.2%

Suppose That Assets and Costs Maintain a Constant Ratio to Sales