If a Firm Has a Required Rate of Return Equal

question 16

Multiple Choice

If a firm has a required rate of return equal to the ROE,

• A)the firm can increase market price and P/E by retaining more earnings.
• B)the firm can increase market price and P/E by increasing the growth rate.
• C)the amount of earnings retained by the firm does not affect market price or the P/E.
• D)the firm can increase market price and P/E by retaining more earnings and increasing the growth rate.

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Definitions:

Disjunctive Argument

An argument based on a disjunction, where at least one of the premises must be true for the conclusion to be true.

Disjuncts

Individual choices or alternatives within a disjunctive proposition, where the truth of any one disjunct implies the falsity of the others when presented in an "either/or" format.

Syllogisms

A form of logical reasoning where a conclusion is drawn from two given or assumed propositions (premises), each of which shares a common or middle term not present in the conclusion.

Hypothetical Proposition

A statement that posits a condition and its potential outcome, often structured as "if-then."