YoY growth rate of 11 percent
Plant currently operating at capacity
Growth will require a new machine costing $3 million
Assume additional $300,000 of annual depreciation for this new machine (10%/year)
Retion ratio = 0.53, internal growth rate = 0.053, sustainable growth rate = 0.110

A. 11% growth is not possible without external financing
B. 11% is above their internal growth rate, meaning this level of growth rate is not possible in one year
C. 11% is above their sustainable growth rate, meaning this level of growth is not possible in one year

Question

15-06-2024
Business

Answered

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YoY growth rate of 11 percent
Plant currently operating at capacity
Growth will require a new machine costing $3 million
Assume additional $300,000 of annual depreciation for this new machine (10%/year)
Retion ratio = 0.53, internal growth rate = 0.053, sustainable growth rate = 0.110

A. 11% growth is not possible without external financing
B. 11% is above their internal growth rate, meaning this level of growth rate is not possible in one year
C. 11% is above their sustainable growth rate, meaning this level of growth is not possible in one year

Sagot :

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