Corporate Finance Southern Connecticut State University
10th Edition
ISBN: 9781121498167
Author: Ross
Publisher: McGraw Hill
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Chapter 4, Problem 3CRCT
External Financing Needed [LO2] Testaburger, Inc., uses no external financing and maintains a positive retention ratio. When sales grow by 15 percent, the firm has a negative projected EFN. What does this tell you about the firm’s internal growth rate? How about the sustainable growth rate? At this same level of sales growth, what will happen to the projected EFN if the retention ratio is increased? What if the retention ratio is decreased? What happens to the projected EFN if the firm pays out all of its earnings in the form of dividends?
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Calculating Flotation Costs [LO4] Suppose your company needs $24 million to build a new assembly line. Your target debt-equity ratio is .75. The flotation cost for new equity is 7 percent, but the flotation cost for debt is only 3 percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small.a. What do you think about the rationale behind borrowing the entire amount?b. What is your company’s weighted average flotation cost, assuming all equity is raised externally?
The relationship between Firm Z's growth potential and its external financing needed is:
EFN = –2,275 + 147,725g
What is the growth rate when EFN is zero?
Multiple Choice
20%
5.25%
0%
1.54%
64.93%
Cash Conversion Cycle. Will each of the followingevents increase or decrease cash conversion cycles?(LO2)A-Higher financing rates induce the firm to reduceits level of inventory.
b.The firm obtains a new line of credit that enablesit to avoid stretching payables to its suppliers.c-The firm factors its trade receivables.d-A recession occurs andthe firm's customersincreasingly stretch their payables.e.The new production process shortens the timeneeded to manufacture products.
Chapter 4 Solutions
Corporate Finance Southern Connecticut State University
Ch. 4.1 - What are the two dimensions of the financial...Ch. 4.1 - Prob. 4.1BCQCh. 4.2 - Prob. 4.2ACQCh. 4.2 - Prob. 4.2BCQCh. 4.3 - Prob. 4.3ACQCh. 4.3 - Prob. 4.3BCQCh. 4.4 - How is a firms sustainable growth related to its...Ch. 4.4 - What are the determinants of growth?Ch. 4.5 - What are some important elements that are often...Ch. 4.5 - Why do we say planning is an iterative process?
Ch. 4 - Prob. 4.1CTFCh. 4 - Prob. 4.2CTFCh. 4 - A firm has current sales of 272,600 with total...Ch. 4 - Prob. 4.4CTFCh. 4 - What is generally considered when compiling a...Ch. 4 - Sales Forecast [LO1] Why do you think most...Ch. 4 - Sustainable Growth [LO3] In the chapter, we used...Ch. 4 - External Financing Needed [LO2] Testaburger, Inc.,...Ch. 4 - EFN and Growth Rates [LO2, 3] Broslofski Co....Ch. 4 - Prob. 5CRCTCh. 4 - Prob. 6CRCTCh. 4 - Prob. 7CRCTCh. 4 - Prob. 8CRCTCh. 4 - Cash Flow [LO4] Which was the biggest culprit...Ch. 4 - Prob. 10CRCTCh. 4 - Prob. 1QPCh. 4 - Prob. 2QPCh. 4 - Prob. 3QPCh. 4 - Prob. 4QPCh. 4 - Prob. 5QPCh. 4 - Prob. 6QPCh. 4 - Prob. 7QPCh. 4 - Prob. 8QPCh. 4 - Prob. 9QPCh. 4 - Prob. 10QPCh. 4 - Prob. 11QPCh. 4 - Prob. 12QPCh. 4 - Prob. 13QPCh. 4 - Prob. 14QPCh. 4 - Prob. 15QPCh. 4 - Prob. 16QPCh. 4 - Prob. 17QPCh. 4 - Prob. 18QPCh. 4 - Prob. 19QPCh. 4 - Prob. 20QPCh. 4 - Prob. 21QPCh. 4 - Prob. 22QPCh. 4 - Prob. 23QPCh. 4 - Prob. 24QPCh. 4 - Prob. 25QPCh. 4 - Prob. 26QPCh. 4 - Prob. 27QPCh. 4 - Prob. 28QPCh. 4 - Constraints on Growth [LO3] Volbeat, Inc., wishes...Ch. 4 - EFN [LO2] Define the following:...Ch. 4 - Growth Rates [LO3] Based on the result in Problem...Ch. 4 - Prob. 1MCh. 4 - Prob. 2MCh. 4 - Prob. 3M
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