An increase in the dividend payout ratio, a decrease in the required rate of return, and a slight increase in the growth rate would
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A. B. C. D.B
The earnings multiplier is equal to Dp / (k - g), where Dp is the dividend payout ratio, k is the required rate of return, and g is the growth rate. The changes specified in this question would undoubtedly increase the earnings multiplier. This estimate is an example of the direction of change approach, which begins with the current earnings multiplier and estimates the direction and extent of change for the dividend payout ratio and the variables that influence the required rate of return and the growth rate of dividends and earnings.