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Hello,
I read in a written answer it saying that because the companies historical earnings growth rate was greater than the cost of equity capital this meant the earnings can’t be sustained in the long run.
I was just wondering why this was? Is it because investors would want more dividends?
Thanks,
AlexThis would not necessarily be the case and depends on the circumstances in the question.
If the answer you are referring to is for a past exam question or a question in the BPP Revision Kit, then say which question it is and then I will be able to answer you properly 🙂
Thanks for this. The question is from an older BPP revision kit for sept 16 – June 17. It’s q.38 Mercury Training (06/08), and the answer is from the section B part.
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