Which of the following statements regarding the value of the firm is most accurate? A) The government engages in a restrictive monetary policy and the expected inflation rate decreases, the P/E ratio will decrease. B) The market requires a lower rate of return, the value of the firm will decrease. C) The board of directors increases the dividend payout ratio, the value of the company will increase. D) A company’s legal and treasury departments act to reduce the tax rate from 37.5% to 37.0%, the value of the firm will increase.
D) tax savings creates value to the firm good Q.
C.
D. C is incorrect as increasing dividend payout ratio also affects growth rate which can have offsetting affect on value. price = D / k-g