Determine whether the following statements are true or false. Briefly explain your answers. [Hint: State your conclusion and then briefly explain (in no more than four lines).]

(a) If a firm announces an unexpectedly large cash dividend, the EMH would predict a gradual price change to occur for several weeks after the announcement.

(b) If the ROE of a company is higher than its discount rate r, it would be in shareholders' interest to retain earnings in the company.