Kirkevue Industries Pays Out All Its Earnings as Dividends, Currently

question 18

Multiple Choice

Kirkevue Industries pays out all its earnings as dividends, currently expects earnings to be constant and has a share price of $27. In order to expand, Kirkevue announces it will cut its dividend payments from $2.15 to $1.75 per share and reinvest the retained funds. What is the growth rate that should be achieved on the reinvested funds to keep the equity cost of capital unchanged?

• A) 1.48%
• B) 0.14%
• C) 0.17%
• D) 0.15%

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Definitions:

Perceptual Priority

The precedence given to certain stimuli over others, allowing them to be processed earlier or more quickly by the sensory system.

Narcissistic

Relating to a personality disorder characterized by an exaggerated sense of self-importance, need for admiration, and lack of empathy.

Self-Esteem Levels

The degree to which a person values themselves, which can range from very high to very low, affecting one's outlook and behavior.

Individualism

A social and political philosophy that emphasizes the moral worth of the individual and the importance of personal independence and freedom.