If a firm's pro forma statements project a net income of $5,000,dividends of $2,000,and an external financing requirement of $2,000,then:

Question

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Since the net income projected is $5,000 and dividends are $2,000, the firm has retained earnings of $3,000 ($5,000 - $2,000). Since the external financing requirement is $2,000, the total assets need to grow by $5,000 ($3,000 + $2,000). Therefore, the best choice is C. The information provided does not imply that the firm must issue new equity or that the profit margin has declined, and it is not possible to calculate the internal growth rate with the given information.

If a Firm's Pro Forma Statements Project a Net Income