If a Firm Has a Required Rate of Return Equal

question 5

Multiple Choice

If a firm has a required rate of return equal to the ROE,

• A) the firm can increase market price and P/E by retaining more earnings.
• B) the firm can increase market price and P/E by increasing the growth rate.
• C) the amount of earnings retained by the firm does not affect market price or the P/E.
• D) the firm can increase market price and P/E by retaining more earnings and increasing the growth rate.
• E) None of the options are correct.

---

Definitions:

Egocentric

A perspective or behavior characterized by a preoccupation with one's own experiences and a lack of consideration for the perspectives of others.

Theory of Mind

A cognitive skill that enables individuals to understand that others have their own beliefs, desires, and intentions that are different from one's own.

Cognitive Structures

Mental frameworks that help individuals organize and interpret information, fundamental to learning and understanding the world.

Beliefs and Feelings

Internal cognitive and emotional states that influence an individual's perceptions and actions.