One of the most important components of stock valuation is a firm’s estimated growth rate. Financial statements provide

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One of the most important components of stock valuation is a
firm’s estimated growth rate. Financial statements provide the
information needed to estimate the growth rate. Consider this
case:
Robert Gillman, an equity research analyst at Gillman Advisors,
believes in efficient markets. He has been following the mining
industry for the past 10 years and needs to determine the constant
growth rate that he should use while valuing Pan Asia Mining
Co.
Robert has the following information available:
The stock’s expected rate of return is 7.20%.
Based on the information just given, what will be Robert’s
forecast of PAMC’s growth rate?
1.99%
2.40%
7.15%
3.60%
Which of the following statements accurately describes the
relationship between earnings and dividends when all other factors
are held constant?
Long-run earnings growth occurs primarily because firms retain
earnings and reinvest them in the business.
Dividend growth and earnings growth are unrelated.
Paying a higher percentage of earnings as dividends will result
in a higher growth rate.