The sustainable growth rate is based on the premise that:
A)an additional dollar of debt will be acquired only if an additional dollar in equity shares is issued.
B)no additional equity will be added to the firm.
C)the debt-equity ratio will be held constant.
D)the dividend payout ratio will be zero.
E)the dividend payout ratio will increase at a steady rate.

Question

Quizplus · Accepted Answer

The sustainable growth rate assumes that the firm will grow without changing its financial leverage, meaning the debt-equity ratio remains constant.

The Sustainable Growth Rate Is Based on the Premise That