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XYZ has positive FCFs and a perpetual growth rate of 5%, Return on Invested Capital (ROIC)l...

XYZ has positive FCFs and a perpetual growth rate of 5%, Return on Invested Capital (ROIC)l is fixed at 20% and the WACC is 25%. If XYZ would double its reinvestment rate (plowback) and nothing else changed, what will happen to its value?

A. The value will be unchanged

B. The value will increase by more than 10%

C. The value will decline to 2/3 of what it was.

D. The value will decline by approximately 40%

E. none of the above.

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