Which of the following statements is true?
A)There is no necessary connection between a firm's growth rate and the rate of return you should expect to earn by investing in the firm.
B)Given the same expected cash flows, a firm that has a lower cost of capital will sell for a lower price than a firm that has a higher cost of capital.
C)It is always better to invest in a high-growth firm since it will offer a higher return on your investment dollars.
D)Slower growing firms are the better choice for long-term investing since they are "slow but steady" whereas the high-growth firms typically have only one or two good years after
Which they tend to earn less than the slower-growth firms.

Question

Quizplus · Accepted Answer

A firm's growth rate and the rate of return you should expect to earn are not necessarily connected. A high-growth firm may have higher potential for returns, but also higher risk. It is important to look at other factors such as the firm's financial health, industry trends, and competition before making investment decisions. The growth rate of a firm does not necessarily determine the rate of return an investor should expect to earn. There are several other factors, such as the firm's cost of capital, industry risks, and competition that need to be considered.

Which of the Following Statements Is True