Which is likely to increase a company's additional funds needed (AFN)?
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All else equal, which of the following is likely to increase a company's additional funds needed (AFN)?
A. An increase in its dividend payout ratio.
B. The company has a lot of excess capacity
C. Accounts payable increase faster than sales.
D. All the statements above are correct.
E. None of the statements above is correct.
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Solution Summary
The solution provides the correct answer, but also explains why the other responses are incorrect.
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AFN = (A*/S)DS - (L*/S)DS - (M)(S1)(RR).
If the firm's dividend payout ratio increases, (RR) will decrease. This will decrease the value of ...
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