Kirkevue Industries Pays Out All Its Earnings as Dividends and Has

question 18

Multiple Choice

Kirkevue Industries pays out all its earnings as dividends and has a share price of $24. In order to expand, Kirkevue announces it will cut its dividend payments from $2.00 to $1.80 per share and reinvest the retained funds. What is the growth rate that should be achieved on the reinvested funds to keep the equity cost of capital unchanged?

• A) 17.97%
• B) 15.33%
• C) 0.83%
• D) 18.23%

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