A Firm That Has an ROE of 12% Is Considering

question 45

Multiple Choice

A firm that has an ROE of 12% 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 statements 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

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Definitions:

Reported Frequency

Refers to the number of times an event or behavior is observed or mentioned over a specified period.

Triangular Theory

Often associated with Robert Sternberg's triangular theory of love, which describes love in terms of three components: intimacy, passion, and commitment.

Arranged Marriage

A marital union where the bride and groom are selected by individuals other than the couple themselves, often by family members.

Empty Love

A type of love characterized by commitment without intimacy or passion, often found in long-term relationships that have lost their spark.