Which of the following statements is FALSE regarding profitable and unprofitable

Question

Which of the following statements is FALSE regarding profitable and unprofitable growth? If the firm retains more earnings, it will bea able to pay out less of those earnings, which means that the firm will have to reduce its dividend. A firm can increase its growth rate by retaining more of its earnings. Cutting the firm's dividend to increase investment will raise the stock price if. and only if, the new investments have a positive net present value (NPV). If a firm wants to increase its share price, it must cut its dividend and invest more. You expect KT industries (KTI) will have earnings per share of $3 this year and expect that they will pay out $1.50 of these earnings to shareholders in the form of a dividend. KTI's return on new investments is 15% and their equity cost of capital is 12%. The expected growth rate for KTls dividends is closest to:

Explanation / Answer

9) False statement = D

10) Growth rate = 15% * ((3 - 1.50)/3)

= 7.5%

Correct option = D

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