03 EOC3 - Question 1 (1 point) If the capital intensity...

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(1 point) If the capital intensity ratio (A*/S0) of a firm actually decreases as sales increase, use of the percentage of sales method will typically understate the amount of additional funds required, other things held constant. a. True b. False Question 2 (1 point) If any firm with a positive net worth is operating its fixed assets at full capacity, if its dividend payout ratio is 100 percent, and if it wants to hold all financial ratios constant, then for any positive growth rate in sales, the firm will require external financing. a. True b. False Question 3 (1 point) Kenney Corporation recently reported the following income statement for 2003 (numbers are in millions of dollars): Sales $7,000 Total operating costs 3,000 EBIT $4,000 Interest 200 Earnings before tax (EBT) $3,800 Taxes (40%) 1,520 Net income available to common shareholders $2,280 The company forecasts that its sales will increase by 10 percent in 2004 and its operating costs will increase in proportion to sales. The company's interest expense is expected to remain at $200 million, and the tax rate will remain at 40 percent. The company plans to pay out 50 percent of its net income as dividends, the other 50 percent will be additions to retained earnings. What is the forecasted addition to retained earnings for 2004? a. $1,140
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03 EOC3 - Question 1 (1 point) If the capital intensity...

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