PhillyDogCare is currently selling at $150 per share. The firms ROE is 20% and its market capitalization rate is 15%. If the company decides to increase its plow back rate from 60% to 80%, what would you expect of the companys stock price?

a) Price will increase because investors will correctly anticipate that PhillyDogCares dividends will grow at a faster rate with a smaller payout ratio

b) Price will drop because many investors will be upset about much lower future dividends

c) Price will increase because the firm will invest in more positive NPV projects

d) Both A and C

e) Not enough information