Question

If a firm has a required rate of return equal to the ROE, Group of answer choices the firm can increase market price and P/E by increasing the growth rate. the firm can increase market price and P/E by retaining more earnings and increasing the growth rate. the amount of earnings retained by the firm does not affect market price or the P/E. None of the options are correct. the firm can increase market price and P/E by retaining more earnings.

Answer 1

the amount of earnings retained by the firm does not affect market price or the P/E

Step-by-step explanation:

A rate of return refers to the net gain or loss of an investment over a particular time period which is typically a year. It is expressed as a percentage of the investment's initial cost.

The rate of return is referred to as the annual return if the time period is typically a year.

If a firm has a required rate of return equal to the ROE, the amount of earnings retained by the firm does not affect market price or the P/E