You have a 9 internal growth rate You expect sales to grow

You have a 9% internal growth rate . You expect sales to grow by 12%.A typical firm will have

A. Negative roe

B. A shortage of funds

C. A surplus of funds

D. Zero external funds needed

E. None of the above

Solution

CORRECT OPTION IS \"c\"

You will have a surplus of funds as sales is increasing by 12% which will again be reinvested at internal growth rate of 9% resulting in excess funds.