A firm that has an ROE of 7% is considering cutting its dividend payout. The stockholders...
- A firm that has an ROE of 7% 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 statement(s) 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
A. I only
B. I and II only
C. II and III only
D. I, II and III
Homework Answers
Answer: A. I only
Note: In handwritten notes:
Up arrow = Increases
Down arrow = decreases
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