A firm expects growth next year to be 10%.Its sustainable growth rate is 12%.Which of the following is TRUE?
A) The firm will need to raise additional debt such that its debt-to-equity ratio will increase.
B) The firm may be able to keep its debt-to-equity ratio the same by reducing dividends (assuming they are projected to be high enough) .
C) The firm will need to raise additional capital through a stock issue.
D) The firm will have excess cash to increase dividends,pay back debt,or repurchase equity.
E) The firm will need to cut back on its planned investments.
Correct Answer:
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