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

Question

Quizplus · Accepted Answer

Total return equals earnings multiplied by the dividend payout rate is a false statement. Total return equals the sum of capital gain and dividend yield, which is (P1 - P0 + D1) / P0.

Which of the Following Statements Is False