Ask Question
14 February, 06:21

If a firm increases its dividend payout rate the: firm will have less cash available for new investment. Unselected firm’s stock price will likely fall by the same percentage. Unselected firm’s retention ratio will rise at the same rate.

+3
Answers (1)
  1. 14 February, 06:58
    0
    1. If a firm increases its dividend payout rate the: firm will have less cash available for new investment. True

    2. Stock price will likely fall by the same percentage. False

    3. Retention ratio will rise at the same rate. False

    Explanation:

    1. If a firm increases its dividend payout rate the: firm will have less cash available for new investment. This assertion is true because the company would be paying out a larger portion of earnings as dividends, hence the balance portion for new investment will be lower as a result.

    2. Stock price will likely fall by the same percentage. This assertion is most unlikely because normally, if a particular stock is paying higher dividends investors will have high expectation and be willing to pay a higher price to buy a stock that pays high dividends

    3. Retention ratio will rise at the same rate. This conclusion is also incorrect because pay out ratio and retention ratio have an inverse relationship. If more dividend is paid out, then less money is retained.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “If a firm increases its dividend payout rate the: firm will have less cash available for new investment. Unselected firm’s stock price ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers