After careful consideration of many alternatives, the strategy team suggests reducing the dividend payout ratio of Elemetrics from 40% to 20%. Despite how variable earnings can be, the team believes the additional earnings retained by the firm will reduce the proportion of debt to target levels in a five-year period and reduce the cost of equity as the debt is decreased.
incorrect, because propositions I and II are violated. incorrect, because proposition I is violated. correct.
How is propositions I and II are violated wrong??? Then what’s the answer?