Which of the Following Statements Is FALSE Regarding Profitable and Unprofitable

question 1

Multiple Choice

Which of the following statements is FALSE regarding profitable and unprofitable growth?

• A) If a firm wants to increase its share price, it must diversify.
• B) If a firm retains more earnings, it will pay out less of those earnings, reducing its dividends.
• C) A firm can increase its growth rate by retaining more of its earnings.
• D) Cutting a firm's dividend to increase investment will raise the stock price if the new investment has a positive net present value (NPV).

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Definitions:

Double-Declining-Balance Rate

A method of accelerated depreciation that applies a constant rate, which is double the straight-line rate, to the declining book value of an asset each year.

Straight-Line Rate

A method of calculating depreciation of an asset, dividing its cost by the number of years in its useful life.

Depreciation Expense

The structured spreading of the expense associated with a tangible asset across its useful life.

Double Declining-Balance Method

An accelerated depreciation method that computes an asset's depreciation at double the rate of the straight-line method over its useful life.