QUESTION

28. Which of the following statements is CORRECT? A) If a firm increases its dividend payout ratio in anticipation of

Category: Business
Subject: Finance
Due Date: 01/27/2016
Question Asked: 2016-01-27 19:26:57

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28. Which of the following statements is CORRECT?

A) If a firm increases its dividend payout ratio in anticipation of higher earnings, but sales

and earnings actually decrease, then the firm’s actual AFN must, mathematically, exceed the

previously calculated AFN.

B) If a firm’s assets are growing at a positive rate, but its retained earnings are not

increasing, then it would be impossible for the firm’s AFN to be negative.

C) Dividend policy does not affect the requirement for external funds based on the AFN

equation.

D) Higher sales usually require higher asset levels, and this leads to what we call AFN.

However, the AFN will be zero if the firm chooses to retain all of its profits, i.e., to have a zero

dividend payout ratio.

E) The sustainable growth rate is the maximum achievable growth rate without the firm

having to raise external funds. In other words, it is the growth rate at which the firm's AFN

equals zero.

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28. Which of the following statements is CORRECT? A) If a firm increases its dividend payout ratio in anticipation of

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...ales and earnings actually decrease, then the firm’s actual AFN must, mathematically, exceed the previously calculated AFN.B) If a firm’s assets are growing at a positive rate, but i...

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