Which of the Following Is Not Necessarily True for a Firm

question 89

Multiple Choice

Which of the following is not necessarily true for a firm with a payout ratio of .15 and ROE of 20%?

• A) It reinvests 85% of its earnings back into the firm.
• B) The firm's retained earnings will increase the book value of equity by 17%.
• C) It pays a dividend of 15 cents per share.
• D) The firm's earnings and equity will grow by 17% per year.

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Definitions:

Evaluate

The process of determining the value or significance of something through analysis or assessment.

Prorata Interest

Interest calculated proportionally, based on the fraction of the period for which the interest is accrued.

Evaluate

To assess or appraise the value, performance, or significance of an object, project, or situation.

Exponent Laws

A set of rules guiding the operations (such as multiplication, division, and raising to powers) on expressions with exponents.