contestada

A firm that has an ROE of 12% is considering cutting its dividend payout. The stockholders of the firm desire a dividend yield of 4% and a capital gain yield of 9%. Given this information, which of the following statements is (are) correct? I. All else equal, the firm's growth rate will accelerate after the payout change. II. All else equal, the firm's stock price will go up after the payout change. III. All else equal, the firm's P/E ratio will increase after the payout change. Multiple Choice I only

Respuesta :

Answer:

I only is correct. That is, all else equal, the firm's growth rate will accelerate after the payout change.

Explanation:

Holding every other condition constant, the cutting of the company's dividend payout will lead to a permanent fall in the dividend per share and this will cause a decrease in price.

However, the cutting the company's dividend payout will increased the retention rate that will increase the growth rate of the company.

Therefore, all else equal, the firm's growth rate will accelerate after the payout change.

 

Otras preguntas