A Firm Will Set a Low Payout Ratio and Finance

A firm will set a low payout ratio and finance by retaining earnings rather than through the sale of new common stock when the:

A) cost of external equity is higher than the cost of internal equity.
B) management wants to dilute the ownership.
C) firm has no constraints in distributing dividends.
D) firm has excess cash to distribute.
E) firm has less investment opportunities to use its earnings.