Which of the Following Statements Is FALSE

question 19

Multiple Choice

Which of the following statements is FALSE?

• A)As firms mature,their earnings exceed their investment needs and they begin to pay dividends.
• B)Total return equals earnings multiplied by the dividend payout rate.
• C)Cutting the firm's dividend to increase investment will raise the stock price if,and only if,the new investments have a positive NPV.
• D)We cannot use the constant dividend growth model to value the stock of a firm with rapid or changing growth.

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Definitions:

Alternate Dividend Policy

A strategy employed by a company to distribute earnings to shareholders through dividends that may vary in amount and frequency depending on the company's earnings, investment opportunities, and capital needs.

Stock Repurchase

A financial transaction in which a company buys back its own shares from the marketplace, reducing the amount of outstanding stock.

P/E Ratio

The price-to-earnings ratio, a valuation metric for stocks calculated by dividing the market value per share by its earnings per share.

EPS

Earnings Per Share, a measure of a company's profitability that is calculated by dividing its net income by the number of outstanding shares.