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A Firm That Has an ROE of 12% Is Considering

question 34

Multiple Choice

A firm that has an ROE of 12% is considering cutting its dividend payout. The shareholders of the firm desire a dividend yield of 4% and a capital gain yield of 9%. Given this information, which of the following statement(s) 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 share price will go up after the payout change.
III. All else equal, the firm's P/E ratio will increase after the payout change.


Definitions:

Manufacturing Overhead

refers to indirect factory-related costs incurred when producing a product, which can include costs related to the maintenance and operation of the factory.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity, allowing more accurate budgeting in variable cost situations.

Units

A quantifiable measure used in manufacturing, inventory, and other sectors, referring to the individual or standardized quantity of a product or material.

Units

A measure of quantity or amount, often used in the context of production, inventory, and sales in business.

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