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:

Common Stock

A type of security that represents ownership in a corporation, giving holders voting rights and entitlement to dividends.

Earnings Per Share

A company's net profit divided by the number of its outstanding shares, indicating the profitability on a per-share basis.

Par

This refers to the face value of a bond or stock as stated by the issuing company.

Net Income

After all costs and taxes are removed from revenues, the company's residual profit.