Which of the Following Combinations Will Produce the Highest Growth

Which of the following combinations will produce the highest growth rate? Assume that the firm's projects offer a higher expected return than the market capitalization rate.

A) a high plowback ratio and a high P/E ratio
B) a high plowback ratio and a low P/E ratio
C) a low plowback ratio and a low P/E ratio
D) a low plowback ratio and a high P/E ratio
E) Neither the plowback ratio nor the P/E ratio is related to a firm's growth.

Correct Answer:

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