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Accounting

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6. Suppose NPI’s reinvestment rate on all future retained earnings were 12% instead of the 16% assumed in the previous problem. (Continue to assume initial earnings of $16 million.) If the dividend payout ratio were increased to 0.75, what happens to the growth rate and the value of NPI? Suppose the dividend payout ratios were decreased to 0.50, how would growth and value change? What would happen to growth and value if the firm stopped reinvesting any earnings and paid out all earnings as dividends?

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