Question

"Which of the following statements is FALSE? A. Total return equals earnings multiplied by the dividend payout rate. B. Cutting the firm's dividend to increase investment will raise the stock price if, and only if, the return of new investments is higher than the cost of capital. C. As firms mature, their earnings exceed their investment needs and they begin to pay dividends. D. We cannot use the constant dividend growth model to value the stock of a firm with rapid or changing growth."

Answer 1

A. Total return equals earnings multiplied by the dividend payout rate.

Step-by-step explanation:

• The payout ratio is a financial metric that shows the proportions of the earnings a company pays the shareholders in the forms of dividends.

• They are expressed as a percentage of the total earnings and some occasion refers top the percentage of the cash flows.

• Thus is called the dividend payment ratio. And is calculated by the dividend payout ratio equal to the total dividend upon the net income as

DPR = Total dividends ÷ Net income.

• It shows the company's earnings paid out as dividends to shareholders. A low payout ratio means a signal that the company is reinvesting bulk earnings into the expanding operations.