Earnings-dividends when all other factors are held constant

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Reference no: EM131581057

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 Asis Minin Co. Robert has the following information available. Pan Asis Minin co. stock is trading at $21.25

Forecasted net income and book value of equity for coming year to be 1,341,300 and 10,497,500 respectively.

Paying dividend for 8 yrs and maintained a dividend payout ratio of 42.5%

Robert's forecast of PAMC growth rate in earnings and dividends should be?

a) 27.16% b)8.15% c) 28.76% d)7.35%

Which of the following statements accurately descrives the relationship between earnings and dividends when all other factors are held constant?

1. Dividend growth and earnings are unrelated

2. Paying a higher percentage of earnings as dividends will result ina higher growth rate

3. long run earnings growth occurs primarily because firms retain earnings and reinvesnt in the business.

Reference no: EM131581057

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