Assume all firms have the same expected dividends. If they have different expect

Question

Assume all firms have the same expected dividends. If they have different expected returns, how will their market values and expected returns be related? What about the relation between their dividend yields and expected returns? (Select the best choice below.) O A. Firms with low expected returns will have high market values and low dividend yields. O B. Firms with low expected returns will have low market values and low dividend yields OC. Firms with high expected returns will have high market values and low dividend yields. O D. Firms with high expected returns will have high market values and high dividend yields.

Explanation / Answer

Answer is C

Firms with high expected returns will have high market values and low dividend yield because higher expected return company will have high market value and which results in low dividend yield as dividend yield = dividend/market price so higher market price will lower the dividend yield

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