Statements regarding profitable and unprofitable growth

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Reference no: EM132009466

Explain why each possible answer is correct or incorrect for the following:

1. Which of the following statements regarding profitable and unprofitable growth is most likely to be false?

a) If the firm retains more earnings, it will be able to pay out less of those earnings, which means that the firm will most likely have to reduce its dividend.

b) If a firm wants to increase its share price, it must reduce its dividend and invest more.

c) A firm can increase its growth rate by retaining more of its earnings

d) Reducing the firm's dividend to increase investment will raise the stock price if, and only if, the new investments have a positive NPV.

Reference no: EM132009466

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