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(i) No External Financing: - Walter' model presume that the firm's investment are financed exclusively by retained earnings and no external financing is used. If it was therefore then the model would be applicable to only those firms in which equity was the only source of finance.
(ii) Constant Rate of Return: - The model presumes that r is constant. This isn't a realistic assumption because when increased investments are made by the firm r as well changes.
(iii) Constant Equity Capitalisation Rate (Ke) :- The model presume that equity capitalization rate remains constant. This is as well not a realistic assumption because equity capitalization rate changes directly with the change in risk complexion of the firm.
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Can I get help with project
Repo rates vary from transaction to transaction. They depend upon a variety of factors like: Collateral's quality Repo term
No External Financing for New Proposals: If a firm have sufficient retained earnings with it as required by the new proposal, then the firm may not raise any external finance. In
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