Question

HV 08 - SLOURS DU Tre ValuDLUI 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: • Pan Asia Mining Co.'s stock (Ticker: PAMC) is trading at $20.00. • The company has forecasted net income and book value of equity for the coming year to be $1,262,400 and $9,880,000, respectively. The company has also been paying dividends for the past 8 years and has maintained a dividend payout ratio of 40.00% Based on this information, Robert's forecast of PAMC's growth rate in earnings and dividends should be: 25.56% 7.67% Which of the following statements accurately describes the relationship between earnings and dividends when all other factors are held constant? O Growth in earnings requires growth in dividends. Retaining a higher percentage of earnings will result in a higher growth rate. O Long-run earnings growth occurs primarily because firms pay dividends to reward their shareholders for investing in the company.

Answer 1

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ke - Microsoft Excel (Product Activation Failed) Page Layout Formulas File Home Insert Data Review View Add-Ins Z AutoSum Cut Wrap Text Calibri 11 General ECopy Fill Merge & Center Insert Delete Format Paste В IU- 000 Conditional Format Cell Sort & Find & % Format Painter Clear Filter Select Formatting as Table Styles Clipboard Font Alignment Number Styles Cells Editing fox AS181 АМ AN AO АР AQ AR AS AT AU 177 PAN ASIA MINING 178 NET INCOME/ EQUITY ROE = 179 1262400/9880o00 180 ROE ROE= 181 12.78% 182 183 DIVIDEND PAYOUT RATIO 40.00% RETENTION RATIO b 184 60.00% 185 b X ROE 186 7.67% [60% X 12.78%] 187 g= 188 STATEMENT 189 TRUE SECOND ONE 190 RETAINING A HIGHER % OF EARNINGS WILL RESULT IN A HIGHER GROWTH RATE 191 192 192 RESI e DGM beta LEASING КЕ САРМ UTILITY, SHARPE, beta PV, FV, ANNUITY DIR right port future INDEX YIELD bond portfolio clean cap stru WACC E 150% cONvexity INTL CAP BUD erences: GX38 WA 07:10 TENG 29-10-2019