Final answer:
The maximum growth rate achievable without additional external financing is the sustainable growth rate. For question 39, the firm should make the investment using its cash, as the return is higher than the interest rate. Question 40’s answer relies on figure data, but the pattern may show diminishing marginal returns.
Step-by-step explanation:
The maximum growth rate that a firm can achieve without any additional external financing is known as the sustainable growth rate. This rate is based on the company's profitability, dividend policy, efficiency in using its assets, and financial leverage. When a company reinvests its earnings rather than distributing them as dividends, it can use those funds to finance its operations and grow.
Answering question 39, suppose a firm is considering an investment with a 6% rate of return and has the option to either borrow at an 8% interest rate or use available cash. Since the firm would not need to borrow and the internal rate of return is lower than the cost of borrowing, it would make sense for the firm to invest using its cash, as it will be earning more on the investment than what it would pay for borrowed funds.
Regarding question 40 about the marginal gain in output from adding barbers, without the specific figure (Figure 7.7), we cannot offer the exact gain in output. However, in general terms, if the addition of barbers continues to show a smaller increase in output with each new barber, this would be indicative of the principle of diminishing marginal returns.