Is growth always beneficial
{"Image DocumentName": "Is growth always beneficial?", "Image ImageDescription": "Does having positive growth always increase stock price? No. It depends on the attractiveness of the firm\u2019s investment opportunities, ROE. Compared to a no-growth policy, If ROE > k, then retaining earnings (i.e., b > 0) will increase stock price. If ROE < k, then retaining earnings will decrease stock price. Remember that k is the investor\u2019s required rate of return on investment in the firm, and more generally, the required rate of return on investments of similar risk. Growth enhances company value only if it is achieved by investment in projects with attractive profit opportunities (ROE > k). When this happens, the NPV of investments is positive and the share price is raised by this amount. However, if investment projects have a return less than k, then retaining earnings to invest in these opportunities will result in a negative NPV. This will lower the share price.", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}