Question

Differential growth refers to the stock of a firm that increases its dividend by

• A. three or more percent per year.

• B. a stated percent each year.

• C. a rate that is expected to be sustainable indefinitely.

• D. an amount in excess of $.25 per year.

• E. varying rates over a period of time.

Answer 1

As per definetion -Differential growth refers to the rate of increase in dividend which is not likely to sustain over an extended period of time.

E is the correct option as there is no specfic growth rate to sustain and it will vary over a period of time , Below is the explaination other 4 options

Here Option A says three or more % per year which might be sustainable , so it cannot be the Answer.

Option B says stated % each year which again can be sustainedover time so it cannot be the Answer.

Options C is just opposite of the Differential growth as it says to be sustainable indefinitely

Option D says again a fixed amount of increase per year which might be sustainable