A firm that has an ROE of 12% is considering cutting its dividend payout. The stockholders of the firm desire a dividend yield of 4% and a capital…

A firm that has an ROE of 12% is considering cutting its dividend payout. The stockholders of the firm desire a dividend yield of 4% and a capital gain yield of 9%. Given this information which of the following statement(s) is/are correct?I. All else equal the firm’s growth rate will accelerate after the payout changeII. All else equal the firm’s stock price will go up after the payout changeIII. All else equal the firm’s P/E ratio will increase after the payout change A. I onlyB. I and II onlyC. II and III onlyD. I, II and III

QUESTION:A firm that has an ROE of 12% is considering cutting its dividend payout. The stockholders ofthe firm desire a dividend yield of 4% and a capital gain yield of 9%. Given this…